The former Chief Information Officer of Equifax U.S. Information Solutions was recently sentenced to four months in federal prison for insider trading prior to Equifax announcing a massive data breach. Former senior executive Jun Ying exercised all his vested Equifax stock options and then sold the shares, netting proceeds of nearly $1 million before public disclosure of the data breach.
In 2017, Equifax announced that a massive breach allowed hackers to illegally access the personal information of more than 140 million Americans, including Social Security numbers, birth dates, credit card numbers, and driver’s license numbers. Although Equifax first discovered the unauthorized access on July 29, the company did not make any public announcement until 40 days later, on September 7, 2017.
On August 25, 2017, Ying texted a co-worker that the breach they were working on “Sounds bad. We may be the one breached.” Three days later, Ying conducted web searches on the impact of Experian’s 2015 data breach on its stock price and exercised all his available stock options, resulting in him receiving 6,815 shares of Equifax stock. He then sold the stock for more than $950,000.
On September 7, 2017, Equifax publicly announced its data breach, which resulted in its stock price falling. By selling his shares before the announcement, Ying avoided more than $117,000 of losses.
In March 2018, the Securities and Exchange Commission (SEC) charged Yang with violating the antifraud provisions of the federal securities laws. In March 2019, Yang pleaded guilty to a charge of securities fraud.
“Ying thought of his own financial gain before the millions of people exposed in this data breach even knew they were victims,” said U.S. Attorney Byung Pak in a recent statement. “He abused the trust placed in him and the senior position he held to profit from inside information.”
“If company insiders don’t follow the rules that govern all investors, they will face the consequences for their actions. Otherwise the public’s trust in the stock market will erode,” stated Chris Hacker, Special Agent in Charge of FBI Atlanta. “The FBI will do everything in its power to stop anyone who takes unfair advantage of their insider knowledge.”
Last week, Ying was sentenced to four months in federal prison to be followed by one year of supervised release, ordered to pay restitution in the amount of $117,117.61, and fined $55,000.
Ying is the second Equifax employee found guilty of insider trading relating to the data breach. On July 23, 2018, former Equifax software engineering manager Sudhakar Reddy Bonthu pleaded guilty to insider trading. To settle the SEC’s civil charges, Bonthu has agreed to a permanent injunction and to return his allegedly ill-gotten gains plus interest.