- The US Securities and Exchange Commission charged three former Netflix employees and two close associates for insider trading.
- One former Netflix employee tipped non-public information about Netflix's subscriber growth to his friends, per the SEC complaint.
- The SEC said the individuals made over $3 million through the illegal trading.
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The US Securities and Exchange Commission charged three former Netflix employees and two close associates who were involved in an insider trading ring that generated over $3 million in total profits, the regulator said Wednesday.
According to the SEC's complaint, Sung Mo "Jay" Jun, while employed at Netflix in 2016 and 2017, repeatedly passed information related to the growth in Netflix's subscriber base 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 Sung Mo Jun left Netflix in 2017, he obtained confidential subscriber growth information from another company insider, Ayden Lee, the US regulator said. He then traded himself and tipped his friends before Netflix earnings announcements through 2019.
The SEC also alleges that Sung Mo Jun's former Netflix colleague Jae Hyeon Bae tipped Joon Jun based on Netflix's subscriber growth information before the company's July 2019 earnings.
The regulator alleges that several of the individuals tried to "evade detection" by using encrypted messaging applications and paying cash kickbacks.
The SEC's complaint was filed in federal court in Seattle. All the individuals but Bae have consented to the entry of judgement which, if approved by the court, would enjoin each from violating the charged provisions, with civil penalties, if any, to be decided later by the court, said the SEC.
Bae consented to the entry of a final judgment, also subject to court approval, permanently enjoining him from violating Section 10(b) of the Exchange Act and Rule 10b-5 and imposing a civil penalty of $72,875.
Sung Mo Jun also agreed to an officer and director bar. The complaint said Sung Mo Jun was at the "center" of the insider trading ring.