A former Equifax executive pleaded guilty Thursday to securities fraud after federal prosecutors said he engaged in insider trading of company stock ahead of Equifax’s public announcement of a massive 2017 data breach.
Jun Ying, formerly chief information officer of Equifax U.S. Information Solutions, was terminated from Equifax a month after the company announced the data breach. Roughly 145 million consumers’ personal and financial information was exposed to hackers, the credit reporting firm has admitted.
“Insider trading is an abuse of trust and victimizes everyone who invests in the stock market,” said U.S. Attorney Byung J. “BJay” Pak after Ying entered his plea. “Our office will continue its work to keep the stock market fair for all investors.”
Ying, 43, was indicted a year ago after prosecutors and the Securities and Exchange Commission concluded that, using confidential corporate information, he determined Equifax had been hacked before the company went public with the news.
Equifax discovered the hack in July 2017, according to a congressional report but did not notify the public until September.
Ying is scheduled to be sentenced on June 27.
As chief information officer, Ying often was entrusted with nonpublic information about Equifax, according to federal prosecutors.
Court papers filed by Ying’s defense contend that Ying was not told of the data breach and that Equifax executives misled him by telling him that work they sought from his team was related to a data breach involving an Equifax customer.
Prosecutors said that, in text messages exchanged on Aug. 25, 2017, Ying speculated Equifax “may be the one breached” and said he was “starting to put 2 and 2 together.”
On Aug. 26, 2017, Ying exercised all of his vested stock options and sold more than 6,800 shares for nearly $1 million prior to public disclosure of the hack, prosecutors said. In doing so, Ying avoided more than $117,000 in losses when Equifax stock prices dropped after it announced the massive breach.
Prosecutors said that, prior to exercising his options, Ying conducted internet searches on the impact that, in 2015, a similar data breach at competitor Experian had on its stock price, prosecutors said.
Ying is represented by Schulte Roth & Zabel partners Douglas Koff and Craig Warkol who declined comment through a spokesman.
Ying is the second Equifax employee to plead guilty to insider trading prompted by the 2017 hack. Last July, Sudhakar Reddy Bonthu—a former software development manager at Equifax—pleaded to violating federal securities laws after he, too, traded his Equifax stock before news of the hack became public.
According to court documents, Bonthu first acquired confidential corporate information about the data breach on Aug. 25, 2017, when Equifax directed him to create a website for consumers affected by the breach. At the time, Bonthu allegedly was told he was doing the work for an anonymous potential client, court documents say. That same day, Bonthu learned that Sept. 6, 2017, was the target date for notifying the public of the breach, the criminal information says.