A former software developer for Equifax faces insider trading charges related to the company's massive data breach last year, federal prosecutors in Atlanta said Thursday.
Sudhakar Reddy Bonthu, 44, used nonpublic information to determine Equifax had been breached last year before any public announcement and then bought put options that he exercised for a profit of more than $75,000 after the breach was announced, according to a court filing.
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Bonthu, an Indian citizen, entered a not guilty plea Thursday before U.S. Magistrate Judge Alan Baverman, who indicated the case would be referred to a U.S. district judge for a guilty plea at a later date. Bonthu was allowed to remain free on a $20,000 signature bond, which means he doesn't have to pay anything unless he fails to appear for hearings.
Bonthu's attorney, Chelsea Thomas, declined to comment after the hearing.
Bonthu is the second former employee of the Atlanta-based credit reporting company to face insider trading charges related to last year's data breach. Jun Ying, former chief information officer of Equifax's U.S. Information Solutions, was indicted in March. The Securities and Exchange Commission on Wednesday also charged Ying with insider trading. Ying has pleaded not guilty.
"Upon learning of potential trading activity by Mr. Bonthu, we immediately launched a review of his trading activity and separated him from our company after he declined to cooperate with our inquiry," Equifax said in an emailed statement, adding that the company is fully cooperating with the SEC and the Department of Justice.
A total of about 147.9 million Americans have been affected by Equifax's data breach, which was disclosed to the public Sept. 7.
From mid-May through July in 2017, unknown individuals accessed some of Equifax's databases without authorization, acquiring names, Social Security numbers, birth dates, addresses and, in some cases, driver's license numbers, the court filings says. Federal authorities say Equifax discovered the suspicious activity on its network on July 29.
In mid-August, the company imposed a trading blackout date for employees who were aware of the breach.
On Aug. 25, Bonthu and other Equifax employees were asked to help respond to the breach, though they were told the work involved a potential Equifax customer, not Equifax itself, the court filing says. He was told the target date for announcing the breach was Sept. 6. On Sept. 1, Bonthu used his wife's brokerage account to buy 86 put options in Equifax stock that expired Sept. 15, the court filing says. Put options allow the holder to make a profit if the stock price drops.
Equifax shares plunged in value after the company disclosed the breach Sept. 7. Bonthu exercised his put options for a profit of more than $75,000, the court filing says.
Bonthu told a colleague he had figured out it was Equifax that had been breached before the information was public, prosecutors say.
"The integrity of the stock markets are jeopardized when greedy individuals who are entrusted with nonpublic information use the knowledge for their benefit," U.S. Attorney Byung J. Pak said in an emailed statement.
Equifax Chief Financial Officer John Gamble and three other executives sold shares worth a combined $1.8 million days after Equifax discovered suspicious activity on its network, but Equifax said an independent committee determined that these executives did not know of the breach when their trades were made.