Former Equifax executive charged with insider trading after data breach

A former Equifax executive has been charged with insider trading after he sold nearly $1m of shares in the credit agency before the company announced a huge data breach.

Federal prosecutors announced the charges against Jun Ying, the former chief information officer of Equifax’s US Information Solutions, on Wednesday.

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“As alleged in our complaint, Ying used confidential information to conclude that his company had suffered a massive data breach, and he dumped his stock before the news went public,” said Richard Best, director of the Securities and Exchange Commission’s Atlanta regional office. “Corporate insiders who learn inside information, including information about material cyber intrusions, cannot betray shareholders for their own financial benefit.”

Equifax announced on 7 September that it had discovered a months-long data breach that potentially exposed the personal information of 143 million people in the United States as well as some 700,000 in the UK.

Its shares were trading at almost $143 before the announcement and fell 18% after the news broke. They are now trading for about $122.

The complaint alleges that Ying and other executives were told of a “VERY large breach opportunity” at Equifax in an email on 25 August.

According to the lawsuit Ying sold about 6,800 Equifax shares “after he learned of the breach but before the company had announced it publicly, amounting to an illegal trade based on insider information”.

Ying sold those shares on 28 August for about $950,000. According to the SEC, he would have made $117,000 less if he had sold those shares after the breach was made public.

The suit also alleges that an hour before Ying sold his shares he “used a search engine to find information on the internet concerning the September 2015 cybersecurity breach of Experian, another one of the three major credit bureaus, and the impact that breach had on Experian’s stock price. The search terms used by Ying were: (1) “Experian breach”; (2) “Experian stock price 9/15/2015”; and (3) “Experian breach 2015.”

The research revealed that while the Experian breach was far smaller than Expedia’s, the disclosure of the breach negatively affected the share price.