Arista Networks Founder To Pay Nearly $1M To Settle SEC Insider Trading Charges

The SEC’s charges are based on allegations that Andy Bechtolsheim traded stock options in Acacia Communications ‘immediately’ after learning about an impending deal to acquire Acacia from a ‘multinational technology company’ seeking his counsel on the matter. The next day, Cisco announced its intent to acquire Acacia for $2.6 billion.

Arista Networks founder Andy Bechtolsheim has agreed to pay a nearly $1 million civil penalty to settle insider trading charges by the U.S. Securities and Exchange Commission.

The SEC announced the charges Tuesday and said Bechtolsheim, who is also Arista’s chief architect, agreed to not serve “as an officer or director of a public company for five years” as part of the settlement. He did not admit or deny the allegations in settling the charges, which were filed in the U.S. District Court for the Northern District of California, it added.

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An Arista spokesperson told CRN that Bechtolsheim “serves in a non-executive role” as the Santa Clara, Calif.-based company’s founder and chief architect and noted that the charges did not involve the trading of Arista securities.

“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. Arista will respond appropriately to the situation,” the representative said in a statement.

The SEC’s insider trading charges are based on allegations that Bechtolsheim traded stock options in Acacia Communications, a Maynard, Mass.-based manufacturer of high-speed optical interconnect products, “immediately” after learning about an impending deal to acquire Acacia from a “multinational technology company” seeking his counsel on the matter.

Bechtolsheim received this “material nonpublic information” about Acacia while he was Arista’s chairman on July 8, 2019, from the multinational company, for which he and Arista had a “longstanding relationship” with, according to the SEC.

The next day, Cisco Systems announced that it planned to buy Acacia for $70 per share in cash in a $2.6 billion deal. Acacia’s stock price rose by 35.1 percent in response to the news, which allowed Bechtolsheim’s trading to generate nearly $416,000 in illegal profits, the agency said.

Bechtolsheim made the profits by trading stock options “in the accounts of a close relative and an associate,” according to the SEC’s complaint.

“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 G. Sansone, chief of the SEC’s Market Abuse Unit, in a statement. “We will continue to pursue and prosecute misconduct by trusted insiders at all levels of the corporate hierarchy.”

Before Bechtolsheim founded Arista with Kenneth Duda and David Cheriton in 2004, he co-founded Sun Microsystems in1982 and Granite Systems in 1995. He was also an early investor in Google, having written a $100,000 check for its founders in 1998.