SEC Charges 3 Former Netflix Software Engineers For Insider Trading

(RTTNews) - The U.S. Securities and Exchange Commission has charged three former software engineers of video streaming giant Netflix (NFLX) for insider trading.

According to the SEC, the three former Netflix software engineers and two close associates made over $3 million in profits by trading on confidential information about Netflix's subscriber growth.

The SEC's complaint alleges that Sung Mo "Jay" Jun was at "the center of a long-running scheme to illegally trade on non-public information concerning the growth in Netflix's subscriber base, a key metric Netflix reported in its quarterly earnings announcements."

The complaint alleges that that Sung Mo Jun, while employed at Netflix in 2016 and 2017, 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.

After leaving Netflix in 2017, Sung Mo Jun got information about Netflix's subscriber growth from another employee Ayden Lee. The SEC alleges that Sung Mo Jun's former Netflix colleague Jae Hyeon Bae, another Netflix engineer, tipped Joon Jun based on Netflix's subscriber growth information in advance of Netflix's July 2019 earnings announcement.

"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 Schneider, Director of the SEC's San Francisco Regional Office. "The charges announced today hold each of the participants accountable for their roles in the scheme."

The defendants allegedly tried to evade detection by using encrypted messaging applications and paying cash kickbacks," added Joseph Sansone, Chief of the SEC's Market Abuse Unit. "This case reflects our continued use of sophisticated analytical tools to detect, unravel and halt pernicious insider trading schemes that involve multiple tippers, traders, and market events."