Billionaire Bechtolsheim Accused of Insider Trading by SEC

Austin Weinstein, Bloomberg News

(Bloomberg) -- Andy Bechtolsheim, the billionaire co-founder of Sun Microsystems Inc. and Arista Networks Inc., will be barred from serving as an executive or board member of a public company for five years after the Securities and Exchange Commission accused him of insider trading.

The SEC alleged in a lawsuit filed Tuesday in federal court in San Jose, California, that Bechtolsheim illegally traded on Cisco Systems Inc.’s $2.6 billion offer to buy Acacia Communications Inc. in 2019. He learned about the deal in advance, the SEC said.

He settled with agency, agreeing to pay a $923,740 fine but didn’t admit to or deny the allegations. A lawyer listed for him in court documents didn’t immediately reply to a request for comment on the suit.

“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,” Joseph Sansone, head of the SEC’s market abuse unit, said in a statement. Bechtolsheim was chairman of Arista from 2008 to 2023.

In a statement, Arista said that Bechtolsheim now serves in a non-executive role as founder and chief architect. “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,” the company said. “Arista will respond appropriately to the situation.”

The SEC said Bechtolsheim learned of Cisco’s proposed purchase of Acacia from an employee of a different, unnamed company. The employee talked with him about a potential last-ditch bid the other company was considering making for Acacia, an optical component maker, according to the suit.

Bechtolsheim then used both brokerage accounts from a relative and an associate to purchase options of Acacia, the SEC claimed. When the Cisco offer was announced a day later, the trades turned a profit of more than $400,000.

After over a year of negotiation, Cisco eventually bought Acacia for $4.5 billion in 2021.

Bechtolsheim has a net worth of $18.4 billion, according to the Bloomberg Billionaires Index. He was also an early investor in Google.

The case is Securities and Exchange Commission v. Andreas Bechtolsheim, 24-cv-01845, US District Court, Northern District of California (San Jose).

(Updates with SEC and Arista comments starting in fourth paragraph.)