Cybersecurity Policy Report, N.D. Ga.: Three Chicago-area residents charged with insider trading, (Aug 18, 2022)
Organizations Mentioned:Equifax
This action is the third set of insider trading charges filed by the SEC relating to Equifax's 2017 breach announcement.
The SEC has charged three Chicago-area residents in a complaint filed in the Northern District of Georgia with insider trading in advance of the 2017 Equifax data breach announcement through the purchase of out-of-the money Equifax put options which netted ill-gotten gains of approximately $108,000 (SEC v. Dishinger, August 15, 2022).
Allegations. According to the SEC’s press release, one of the defendants worked as a finance manager at a public relations firm hired by Equifax to help it manage the numerous government and media inquiries that it expected to receive when news of the data breach was made public. Upon learning of the breach, the former finance manager tipped her significant other and he then tipped a mortgage business client who then purchased out-of-the-money short-term Equifax put options in his own brokerage account. The mortgage business client was later reimbursed by check for the purchase cost of the options, and, not so subtly, the significant other scribbled in the check's memo line the words “Blue Horseshoe,” an apparent reference to the coded language used to convey inside information in the 1987 movie Wall Street. In addition, the significant other disclosed the breach to his brother and office co-worker who then passed the information to a friend and convinced the friend to purchase out-of-the-money short-term Equifax put options.
The day after Equifax announced the breach, its common stock price fell by nearly 14 percent, allowing for the individuals to sell their put options for approximately $108,000 in ill-gotten gains.
Penalties. Without admitting or denying the allegations in the SEC’s complaint, two of the defendants consented to the entry of a final judgment, subject to court approval, which would permanently enjoin them from violating Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. Each agreed to disgorgement plus prejudgment interest and civil penalties. The litigation as to the last defendant remains pending.
The press release also notes that this is the third set of insider trading charges filed by the SEC relating to Equifax's 2017 breach announcement.
The case is No. 1:22-cv-03258-TWT.
Attorneys: Madison Graham Loomis for the SEC.
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