Securities and Exchange Commission sues ex-Netflix software engineers for insider trading
Three former Netflix Inc. software engineers and two close associates were sued by federal regulators for profiting $3 million by trading on confidential information about the company’s subscriber growth.
Sung Mo “Jay” Jun, 49, while employed at Netflix in 2016 and 2017, allegedly repeatedly tipped this information to his brother, Joon Mo Jun, and his close friend, Junwoo Chon, who both used it to trade in advance of multiple Netflix earnings announcements, according to a Wednesday complaint from the U.S. Securities and Exchange Commission. After Sung Mo Jun left Netflix in 2017, he obtained the same subscriber growth information from another Netflix insider, Ayden Lee, according to the SEC.
“We allege that a Netflix employee and his close associates engaged in a long-running, multimillion dollar scheme to profit from valuable, misappropriated company information,” said Erin E. Schneider, head of the SEC’s San Francisco office.
Jun, his brother and friend Chon all allegedly used encrypted messaging applications to discuss their trading in an attempt to evade detection. Another former colleague of Jun tipped the insider trading ring to the subscriber growth numbers in July 2019. In all, the group traded ahead of nine Netflix quarter earnings announcements from June 2017 to July 2019, according to the SEC.
As the power to produce and exhibit films online consolidates, giant streaming platforms are slowly limiting their content to their own productions.
Federal prosecutors in Seattle filed criminal securities fraud charges against four of the five defendants named in the SEC complaint. The criminal case was filed in a charging document called an information, which is typically used when defendants have already agreed to plead guilty.
The criminal charges rely on the same conduct alleged in the SEC complaint, alleging the subscriber data gleaned through their work as Netflix software engineers was used to inform trades in the company stock from 2016 to 2019 that netted millions in illicit gains.
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