SEC and SolarWinds Seek Settlement in Securities Fraud Case
Categories: U.S. Federal Law, Cybersecurity, Enforcement In a surprising development in the US Securities and Exchange Commission’s (“SEC’s”) ongoing securities fraud case against SolarWinds Corp. (“SolarWinds”) and its former chief information security officer (“CISO”), Timothy Brown, all three parties have petitioned the judge for a stay pending final settlement. Until the SEC’s four commissioners can vote to approve the settlement, the parties have requested the stay until at least September 12, 2025. As we previously reported, in October 2023, the SEC sued software developer SolarWinds and its former CISO, alleging that SolarWinds misled investors about a series of heavily publicized cyberattacks that targeted the company, culminating in the December 2020 Sunburst malware attack. In addition to alleging securities fraud and violations of SEC reporting provisions, the SEC also alleged that SolarWinds violated Sarbanes-Oxley internal control provisions. In July 2024, U.S. District Judge Paul A. Engelmayer granted SolarWinds’ and the company’s former CISO’s motions to dismiss on most claims. A single set of fraud claims survived concerning alleged misstatements and omissions in a “Security Statement” that was published on SolarWinds’ website. The Security Statement described the company’s various cybersecurity practices, which the SEC alleges painted an incomplete and misleading picture. As recently as June 2025, the SEC indicated it was ready to try the case and filed a motion in opposition to the defendants’ motion to dismiss the remaining claim. On July 2, 2025, all three parties—the SEC, SolarWinds and the company’s former CISO—sent a joint letter to the judge indicating they had reached an agreement in principle to settle the case. Any settlement is subject to approval of the four SEC commissioners. As noted above, the parties’ joint letter requested a stay until at least September 12, 2025 to give the SEC commissioners time to review the matter. Two of the sitting commissioners have been critical of the SEC’s case. It is difficult to speculate what the final terms of settlement may be. Unrelated to this case, with the change in presidential administration, the SEC has dismissed numerous enforcement cases targeting the cryptocurrency industry on the grounds that the cases were imprudently brought. It is possible this philosophy has now been extended to the SolarWinds case, and the SEC may seek to drop the case entirely. It also is possible that this movement by the SEC staff is more in line with other settled cases, and could simply entail reduced charges and remedies acceptable to all parties. The fact that the SEC enforcement staff still needs approval by the SEC commissioners may imply that this latter scenario is more likely. Like any plaintiff, the SEC does from time to time settle enforcement cases after they have entered litigation for any number of reasons.
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