SEC fines Arista Networks founder Bechtolsheim $1M for insider trading

Dive Brief:

The Securities and Exchange Commission on Tuesday charged Arista Networks founder Andreas “Andy” Bechtolsheim with insider trading, fining him nearly $1 million and barring him from serving as an executive or board member at a public company for five years.
The SEC alleged in a court filing that Bechtolsheim in 2019 traded on information that Cisco Systems planned to buy Acacia Communications. He learned of the imminent deal from an unidentified technology company that was considering acquiring Acacia, the agency said.
“We allege that Bechtolsheim, while serving as the chairman of a publicly traded company, abused the trust of a longtime business contact who had shared highly sensitive information about an imminent corporate acquisition,” said Joseph Sansone, chief of the SEC’s market abuse unit. “We will continue to pursue and prosecute misconduct by trusted insiders at all levels of the corporate hierarchy.”

Dive Insight:

Bechtolsheim on July 8, 2019, learned of the planned acquisition of Acacia from the executive of a technology company who called to discuss the transaction after consulting with the company’s CFO, according to the SEC. Arista and the technology company were bound by a non-disclosure agreement, the agency said.

Immediately after speaking with the executive and just minutes before the stock market closed, Bechtolsheim called a relative’s stock broker and arranged put option contracts, and did the same for an “associate,” the SEC alleged. Acacia’s stock closed that day at $48.06 per share.

“Bechtolsheim knew or was reckless in not knowing that the information he learned about Acacia’s impending acquisition was material and nonpublic,” the SEC said in its court filing.

The following day before the stock market opened, Cisco announced an agreement to buy Acacia for $70 per share. The stock price that day rose 35.1%, yielding a windfall totaling $415,726 for Bechtolsheim’s relative and associate, the SEC said.

“While the SEC announcement did not involve any trading in Arista securities, Arista takes compliance to the company's code of conduct and insider trading policy seriously,” an Arista spokesperson said in a statement.

“Arista will respond appropriately to the situation," the spokesperson said, noting that currently Bechtolsheim “serves in a non-executive role as Arista's founder and chief architect.”

Bechtolsheim, who served as Arista’s chairman and chief development officer from 2008 until December 2023, settled with the SEC without admitting or denying its allegations, the SEC said. He agreed to pay a penalty of $923,740, the agency said.