Netflix Insider Trading Ring Gets Busted
Posted on 08/21/2021
The Securities and Exchange Commission (SEC) revealed insider trading charges against three former Netflix Inc. software engineers and two close associates who generated over US$ 3 million in total profits by trading on confidential information about Netflix’s subscriber growth. The SEC complaint was filed in federal court in Seattle. In a parallel action, the U.S. Attorney’s Office for the Western District of Washington filed a criminal information against Sung Mo Jun, Joon Jun, Chon, and Lee. The defendants allegedly tried to evade detection by using encrypted messaging applications and paying cash kickbacks, according to Joseph Sansone, Chief of the SEC’s Market Abuse Unit in a press release. Trading based on nonpublic information is a U.S. federal crime.
Junwoo Chon (age 50) of Bellevue faces as many as 20 years behind bars when his sentencing commences on December 3, 2021. Junwoo Chon pleaded guilty to federal insider trading allegations after prosecutors said he made US$ 1.6 million in illegal profits gained from proprietary subscriber information passed along by an employee of Netflix.
According to the SEC’s complaint, “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 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.
The SEC’s complaint further alleges that after Sung Mo Jun left Netflix in 2017, he obtained confidential Netflix subscriber growth information from another Netflix insider, Ayden Lee. Sung Mo Jun allegedly traded himself and tipped Joon Jun and Chon in advance of Netflix earnings announcements from 2017 to 2019. 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. According to the complaint, Sung Mo Jun, Joon Jun, and Chon made approximately $3 million in total profits from the illegal scheme. The SEC Market Abuse Unit’s Analysis and Detection Center uncovered the trading ring by using data analysis tools to identify the traders’ improbably successful trading over time.”