The SEC busted a multi-million dollar insider trading ring at Netflix, the agency said in a new press release this week. The regulator charged three former Netflix employees with making over $3 million after having access to the company’s confidential subscriber information leading into earnings announcements.
Sung Mo “Jay” Jun was sued by the SEC for being “at the center of a long-running scheme to illegally trade on non-public information concerning the growth in Netflix’s subscriber base,” the release says. The SEC said that while he worked at Netflix from 2016 to 2017, he tipped off material non-public information to his brother Joon Mo Jun and his close friend Junwoo Chon.
After leaving Netflix in 2017, Jun also allegedly continued to receive confidential information from another company insider. He also traded on that information, the complaint says.
“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. Sung Mo Jun, Joon Jun, and Chon allegedly used encrypted messaging applications to discuss their trading in an attempt to evade detection,” the release says.
In total, the group made about $3 million from the scheme.
Erin E. Schneider, Director of the SEC’s San Francisco Regional Office, said: “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. The charges announced today hold each of the participants accountable for their roles in the scheme.”
Joseph Sansone, Chief of the SEC’s Market Abuse Unit, said: “The defendants allegedly tried to evade detection by using encrypted messaging applications and paying cash kickbacks. 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.”
The U.S. Attorney’s Office for the Western District of Washington also filed a parallel criminal complaint against Jun, Chon and Lee.