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Former Equifax employee sentenced for insider trading
Jun Ying, the former Chief Information Officer of Equifax U.S. Information Solutions, has been sentenced to federal prison for insider trading.
"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 J. "BJay" Pak. "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," said 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."
[...] On Friday, August 25, 2017, Ying texted a co-worker that the breach they were working on "sounds bad. We may be the one breached." The following Monday, Ying conducted web searches on the impact of Experian's 2015 data breach on its stock price. Later that morning, Ying exercised all of his stock options, resulting in him receiving 6,815 shares of Equifax stock, which he then sold. He received proceeds of over $950,000, and realized a gain of over $480,000, thereby avoiding a loss of over $117,000. On September 7, 2017, Equifax publicly announced its data breach, which resulted in its stock price falling.
Jun Ying, 44, of Atlanta, Georgia, was sentenced to four months in 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 was convicted on these charges on March 7, 2019, after he pleaded guilty.
Also at The Verge and DARKReading.
(Score: -1, Troll) by Anonymous Coward on Tuesday July 02 2019, @08:43AM (13 children)
When he dumped his shares it was a signal to everyone else that something was up, if not for that people would have ignorantly continued to overvalue the company and pay too much for the stock.
I see zero problem with insider trading, especially since congress is legally allowed to do it. It's another fake crime like smoking weed.
(Score: 2) by Rupert Pupnick on Tuesday July 02 2019, @12:20PM (9 children)
I don’t agree with you but it does raise the question of whether an insider sale is the only type of transaction that can be considered a crime.
For example, if I have inside information as an employee that makes me confident that my company stock is going to appreciate in value, is it illegal for me to buy shares?
(Score: 0) by Anonymous Coward on Tuesday July 02 2019, @12:38PM
Then it should also be a crime to not buy because it lets people continue to sell the stock at lower prices than they would if they had the same info as you.
(Score: 5, Informative) by Dale on Tuesday July 02 2019, @12:39PM (7 children)
Yes, a buy action can and is insider trading if you are in possession of material, non-public information.
My company routinely sends out "black out" period emails to all employees shortly after the quarter ends and we usually get the "black out period ending" email a couple of hours after they do their quarterly earnings call. While the overall email is overkill (and not legally enforceable), it is a good warning to people to not play games and shield the company from liability since they've actively taken steps to tell people not to trade. I've had trades execute on my company stock during the black out period, but those were options triggering the trade and those options were purchased prior to our black out period.
If someone had a re-occurring trade set (ie. exercise 1,000 shares per quarter) or put in an order prior to gaining material information (ie. buy/sell if price rises/falls to $X, etc) then that is a great argument that it is not insider trading as they are setup prior to any material, non-public information coming to light.
My boss does have access to what would be material, non-public information (or an argument could be made that he could). He generally avoids trading in our company stock aside from exercising his options (which he does not do in the blackout periods). Our stock typically trades in accord with the rest of our industry, regardless of the actions/activity of any one company in the industry. He simply trades on our competitors rather than in our own stock when he thinks it is over/under valued. He certainly does not have material, non-public information on a company he does not work for (and in facts works for their competitor).
(Score: 0) by Anonymous Coward on Tuesday July 02 2019, @12:57PM (6 children)
All you have to do is set up a recurring trade that you would normally cancel or hedge, then when you get some inside info just fail to do anything.
(Score: 0) by Anonymous Coward on Tuesday July 02 2019, @01:03PM (2 children)
Yup, that's the loophole and every CEO does it.
(Score: 0) by Anonymous Coward on Tuesday July 02 2019, @02:25PM
I don't know about that, but it is pretty obvious.
(Score: 0) by Anonymous Coward on Tuesday July 02 2019, @06:27PM
I don't think it is that easy to absolve oneself of responsibility for trading on non-public information.
(Score: 1) by khallow on Wednesday July 03 2019, @04:36AM (2 children)
Why would you have such a recurring trade that you would normally cancel or hedge? Why didn't you do so at the time you had insider information? The court isn't going to look at that as leniently as you are now. The otherwise very unnecessary complexity of such trading would be evidence for its criminality.
(Score: 0) by Anonymous Coward on Wednesday July 03 2019, @10:04AM (1 child)
It's not going to get to "the court", it just has to be enough to avoid a scandalous news story.
(Score: 1) by khallow on Wednesday July 03 2019, @11:52AM
(Score: 0) by Anonymous Coward on Tuesday July 02 2019, @04:00PM (2 children)
Let's take as an assumption that the stock market is a good thing to have. If you disagree with this, then it doesn't matter if the market "doesn't work."
The problem with insider trading is that it ruins the market. See The Market for Lemons [wikipedia.org].
The quick summary is that generally people sell things when they are overpriced (why would you sell a $50 shoe for $25?), and buy things when they are underpriced (why would you buy a $25 shoe for $50?). However, insiders know more than outsiders do. As such, insiders sell things when they are overpriced, and those without that inside information know that. Therefore, no buyer is going to buy any stock in a company, because they know it's overvalued. Therefore the market collapses.
Making insider trading illegal fixes that problem because the buyer can work off the understanding that they have as much information as the seller, so there is a decent chance the stock value is currently either overpriced or underpriced. (Another way this is fixed is with things like warranties and anti-lemon laws.)
(Score: 0) by Anonymous Coward on Tuesday July 02 2019, @04:09PM
Nothing is "fixed" at all. People with extra info are still buying low and selling high. And I have no problem investing in a company while knowing that some people have more info than me, that is already known to be the case.
Maybe the people who wouldn't invest under those circumstances shouldn't be buying stock to begin with... but they are forced to because inflation (actual, not the fake CPI) is so much higher than interest rates so just keeping money in the bank is now a losing scenario. You need to double your money at least every 10 years to keep up, stocks are the only option for most. And negative interest rates are on the way soon.
(Score: 1) by khallow on Wednesday July 03 2019, @04:45AM
What is ruined about the market? We already know that stock markets have participants with very widely different levels of skill and knowledge. Second, one of the key purposes of markets is to efficiently transfer information (obviously of the sort related to what is traded on the markets). When insiders are kept from trading on the market, they're also kept from revealing the information they know.
The obvious rebuttal is 1) insiders are lean on capital - the company wouldn't be publicly traded in the first place, if the insiders had enough capital for all their schemes, and 2) insider knowledge is not perfect knowledge - it can be deeply flawed in ways that underprice a stock's price.
It would be a mistake to do whether or not insider trading is considered illegal.
A big problem with this whole scheme is that it shifts wealth to the parties who can get away with insider trading despite its illegality.