Mar 27, 2024 - Business

Early Google investor accused of insider trading

Andy Bechtolsheim

Andy Bechtolsheim. Photo: David Paul Morris/Bloomberg via Getty Images.

One of Silicon Valley's most successful founders and investors just got accused of insider trading.

Driving the news: The SEC on Tuesday alleged that Andy Bechtolsheim confidentially learned of Cisco's plans to buy Acacia Communications, shortly before the $4.5 billion deal was announced in 2019, and then traded Acacia options by accessing brokerage accounts of a relative and associate.

  • The scheme generated $415,726 in what the SEC refers to as "illegal profits."
  • Bechtolsheim agreed to pay a civil penalty of nearly $1 million, without admitting or denying wrongdoing. He also will be barred from serving as an officer or director of a public company for five years.
  • The SEC did not make any announcement regarding disgorgement by owners of the two accounts, and declined to comment on if related complaints are in the works.

Why it matters: Bechtolsheim co-founded several tech companies, including Sun Microsystems, Granite Systems, and Arista Networks.

  • He also wrote one of the first checks into Google, investing $100,000 before the search giant had even been incorporated, in what was arguably the greatest angel investment of all time.
  • His net worth is estimated to be over $16 billion. That means the civil penalty is pocket change. Then again, so would have been a legal fight to save an invaluable reputation.

Zoom in: Bechtolsheim remains "chief architect" at Arista, a publicly traded company worth around $93 billion.

  • In a statement, Arista emphasizes that it "takes compliance to the company's code of conduct and insider trading policy seriously [and] will respond appropriately to the situation."

The bottom line: It should be inconceivable that someone so wealthy would do something so reckless for relatively little reward. Except that we've seen it happen time and time again.

Read the SEC's complaint:

Go deeper