Former Netflix employees were accused of generating $3 million from insider stock purchases. In addition to the profits they generate from their own activities, many companies list their shares on the stock market in search of resources. Usually, these shares rise in price when some announcement or event attracts more attention than usual among investors.
Three former Netflix employees have been charged with allegedly engaging in insider trading at the company, in periods strategically calculated for trading profits. One of these individuals, who served as a software engineer at the company, allegedly told his brother and a close friend about Netflix’s new subscriber base figures before details were officially disclosed in public accounting.
Legal action against former Netflix employees accused of using confidential information to acquire stock
The SEC, the U.S. Securities and Exchange Commission, sued the five individuals named in a Seattle federal court for generating more than $3 million in total profits through stock speculation acquired with knowledge of confidential information about the growth of Netflix’s subscriber base.
The SEC’s complaint primarily targets Sung-Mo Jun, who previously served as a software engineer at Netflix. It is indicated that the defendant headed a scheme to illegally acquire shares, making prolonged use over time of confidential corporate information regarding the growth of Netflix’s subscriber base.
This metric is a key factor within Netflix, which is reported periodically during its quarterly earnings announcements. Part of the influence of this metric lies precisely in the stock, whose price increases if the demand for the stock increases in the face of a powerful announcement. The use of privileged information makes it possible to anticipate announcements and obtain shares at a lower price than they could reach in the short or medium term.
This claim, materialized through a lawsuit, alleges that during Sung-Mo Jun’s employment at Netflix between 2016 and 2017, he repeatedly shared information regarding the growth of the subscriber base to his brother, Joon Mo Jun, and his close friend, Jun-woo Chon, who also acquired shares based on this information. The lawsuit charges that the Jun and Chon brothers allegedly tried to evade detection by using encrypted messaging apps and paying cash bribes.
After 2017, already a former employee of the company, Sung-Mo Jun continued to receive updates on this confidential corporate data, with Ayden Lee and Jae Hyeon Bae, employees still working at Netflix at the time, being his new informants.
Each defendant faces a charge of violating the anti-fraud provisions of their country’s Securities Exchange Act. In addition to the Seattle prosecution, the U.S. Attorney’s Office for the Western District of Washington also filed a parallel action on the same charges.
In recent times, we have known other cases of illegal stock transactions, such as the case of the US citizen who was imprisoned after it was discovered that he generated close to one and a half million dollars with illegally obtained Amazon shares, using insider information.
