Insider-trading scheme netted more than $331,000 in illegal profits.

A former IT specialist at Expedia has admitted he used his privileged position to access executives' e-mails in an insider stock-trading scheme that netted almost $330,000 in illegal profits, prosecutors said.

During the two-year span that Jonathan Ly, 28, of San Francisco, worked at the online travel service, he accessed e-mail accounts belonging to the company's chief financial officer, head of investor relations, and other high-ranking employees, prosecutors with the US attorney's office in Seattle alleged in a criminal complaint filed late last week. The correspondence included upcoming earnings reports, a draft of an upcoming press release announcing Justice Department approval of Expedia's acquisition of competitor Orbitz, and other stock-moving developments that weren't yet public. Ly used the information to buy Expedia stock at a low price and then sell it after the disclosures went public at a much higher price.

"Beginning in 2013, and continuing through October 2015, Ly secretly and fraudulently accessed the contents of Expedia executives' computer files and corporate e-mail accounts in order to obtain material, non-public, and proprietary information belonging to Expedia without the knowledge and permission of the executives or Expedia," the complaint alleged. "Ly fraudulently obtained the information in order to execute a series of well-timed and lucrative securities trades in Expedia options. As a result of his scheme, Ly obtained through his securities trades net profits in excess of $331,000."

Earlier this week, Ly pleaded guilty to securities fraud. Under the plea deal, he agreed to repay more than $375,000 in illegal gains plus interest. Final sentencing is scheduled for February 28. Ly still faces charges detailed in a separate complaint filed by the Securities and Exchange Commission.

Security lapse

The legal filings went on to reveal a major lapse in the way Expedia protected its shareholders against malicious insiders. Although Ly's employment ended in April 2015, prosecutors said, he retained a laptop that was issued to him when he started working at the company. The laptop, the legal filings said, contained software that allowed Ly to connect to Expedia's network and continue stealing non-public information that had a material effect on the company's stock. According to US attorneys, Ly's illegal stock scheme continued through October 2015. SEC attorneys alleged it stretched into this year.

Malicious insiders, particularly those with privileged access to computer networks, have long been regarded as one of the chief security threats facing any company. Recent examples include a senior IT worker for high-profile law firm Wilson Sonsini Goodrich & Rosati suspected of stealing client information and using it to trade stocks and the suspicions a National Security Agency insider helped leak top-secret documents and source code earlier this year.
As a result of such threats, security experts almost unanimously agree that accounts, passwords, cryptography keys, and other credentials should always be promptly closed or revoked as soon as any employee departs. The filings said that Ly's retention of the laptop happened without the knowledge or permission of Expedia, but they didn't explain how that lapse was allowed to happen.