Smells like classic insider trading….

Full Article (Washington Post) is Here

Top investors in SolarWinds, the Texas-based company whose software was breached in a major Russian cyberattack, sold millions of dollars in stock in the days before the intrusion was revealed.

The timing of the trades raises questions about whether the investors used inside information to avoid major losses related to the attack. SolarWinds’s share price has plunged roughly 22 percent since the company disclosed its role in the breach Sunday night…

It’s unknown when SolarWinds’s executives and insiders first learned of the hack. But a former enforcement official at the U.S. Securities and Exchange Commission and an accounting expert both said the trades would likely spark an investigation by federal securities watchdogs into whether they amounted to insider trading.

“Of course the SEC is going to look at that,” said Jacob S. Frenkel, a former senior counsel in the SEC’s Division of Enforcement. “Large trades in advance of a major announcement, then an announcement: That is a formula for an insider trading investigation.”

Frenkel said a probe could take up to a year as investigators seek to determine whether insiders traded on information that “would be important to a reasonable investor.” Frenkel has no financial relationship to SolarWinds or its investors, he added.

Silver Lake, a Silicon Valley investor with a history of high-profile tech deals including Airbnb, Dell and Twitter, sold $158 million in shares of SolarWinds on Dec. 7 — six days before news of the breach became public. Thoma Bravo, a San Francisco-based private equity firm, also sold $128 million of its shares in SolarWinds on Dec. 7.

Together, the two investment firms own 70 percent of SolarWinds and control six of the company’s board seats, giving the firms access to key information and making their stock trades subject to federal rules around financial disclosures.

Three executives from Thoma Bravo are directors on the SolarWinds board: Seth Boro, James Lines and Michael Hoffman. Three executives from Silver Lake — Kenneth Hao, Michael Bingle and Mike Widmann — are also on the board.

It was both investors’ largest sale of SolarWinds stock since the company went public in 2018. Last year, Silver Lake sold about $140 million and Thoma Bravo sold about $110 million in shares, according to regulatory filings.

In a joint statement, representatives from Silver Lake and Thoma Bravo said the stock sale was a “private placement” with a single institutional investor, and added that the investment firms “were not aware of this potential cyberattack at SolarWinds prior to entering into” the deal.