August 19, 2021
The U.S. Securities and Exchange Commission and U.S. District Attorney for the state of Washington have filed separate criminal complaints against three former Netflix engineers who allegedly used non-public information on the streamer’s subscriber growth to generate $3 million in personal stock market gains.
Netflix’s subscriber growth has been a key driver in the SVOD pioneer’s skyrocketing market valuation and enrichment of shareholders. The service ended the most recent fiscal period with more than 209 million subscribers.
The complaints, filed in federal court in Seattle, allege Sung Mo Jun, an engineer at Netflix from 2016 to 2017, tipped his brother, Joon Mo Jun, and accomplice Junwoo Chon in advance of quarterly earnings reports.
The complaint alleges that after Sung Mo Jun left Netflix, he continued to receive confidential sub growth data from Netflix employees Ayden Lee and Jae Hyeon Bae. The Jun brothers and Chon allegedly tried to cover their actions through cash kickbacks and encrypted messaging.
The SEC reportedly discovered the illegal actions after its internal software tracked the ongoing “improbably successful” stock trades.
Chon has pleaded guilty to the charges and is cooperating with officials. He awaits sentencing Dec. 3, according to Tess Gorman, Acting U.S. Attorney for the Western District of Washington. An insider trading conviction can bring up to 20 years in prison and $5 million fine.
“Insider trading is not a victimless crime,” Gorman said in a statement. “When someone on one side of the trade has non-public information, they have an advantage over the person on the other side — the person who ultimately loses money on their securities trade. The integrity of our financial markets demands a fair and level playing field.”