Aug 19, 2021 11:50:00

Former Netflix employees are charged with insider trading, sharing subscriber count information with groups before earnings announcement

On August 18, 2021, the

Securities and Exchange Commission, which oversees and monitors securities trading in the United States, announced that it had indicted former Netflix employees for insider trading. Former employees got information about the increase in Netflix subscribers and shared it with their brothers and friends before the announcement of financial results, and after leaving Netflix, they got information from another employee and made transactions on their own. It is said that.

SEC.gov | SEC Charges Netflix Insider Trading Ring
https://www.sec.gov/news/press-release/2021-158

Netflix insider trading ring reaped $ 3 million in profit, SEC says
https://www.cnbc.com/2021/08/18/netflix-insider-trading-ring-reaped-3-million-in-profit-sec-says.html

Three Former Netflix Software Engineers Charged With Insider Trading By SEC – Deadline
https://deadline.com/2021/08/three-former-netflix-software-engineers-charged-insider-trading-sec-1234817441/

Ex-Netflix Employees Accused of $ 3.1 Million Insider Trading Scheme --Variety
https://variety.com/2021/digital/news/netflix-ex-employees-insider-trading-scheme-1235044101/

According to the Securities and Exchange Commission, insider trading was centered around three former Netflix employees, Sung Mo 'Jay' Jun, his brother Joon Mo Jun, and his best friend Junwoo Chon. Sung Mo Jun was a Netflix software engineer from 2013 to 2017, and got information about the increase in Netflix subscribers from 2016 to 2017 before the announcement of financial results, and his brother Joon Mo Jun and others. I was providing information to my best friend Chon.

Joon Mo Jun and Chon used this information to trade Netflix shares four times from 2016 to 2017, with Joon Mo Jun trading at $ 215,000 and Chon at $ 521,000. It is said that it earned 57.3 million yen). In addition, Chon gave 60,000 dollars (about 6.6 million yen) of the profit to Sung Mo Jun as a share.

Sung Mo Jun left Netflix in 2017, but the successor was Ayden Lee, who worked as a software engineer at Netflix from 2016 to February 2021. Lee has Sung Mo Jun as an in-house mentor, and even after Sung Mo Jun left the company, he provided information on the number of subscribers upon request. Sung Mo Jun will share information from Lee with Joon Mo Jun and Chon, with Sung Mo Jun at $ 453,000 and Joon Mo Jun at $ 813,000 by 2019. About 89.4 million yen), Chon earned 1.1 million dollars (about 120 million yen). It is estimated that the criminal group has earned more than $ 3 million in a series of insider trading.

The SEC used a data analysis tool to discover a suspicious transaction history, and it seems that there was also a history of 'transactions that tried to make a profit but did not work'. It has also been revealed that the criminal group was discussing the transaction using an encrypted messaging app to avoid an investigation by the authorities.

Sung Mo Jun, Joon Mo Jun, Chon, and Lee have pleaded guilty to criminal proceedings, and will be fined in civil proceedings in the future. Lee wasn't paid for providing the information, and his lawyer, David Callaway, claimed that Lee was being used by his mentor and friend, Sung Mo Jun. 'Nevertheless, Ayden takes full responsibility for his actions and looks forward to overcoming this mistake and moving his life forward,' Callaway said.

A former Netflix employee, Jae Hyeon Bae, who was discussing transactions with Sung Mo Jun and others in the app's chat group, was also fined in a civil lawsuit. Bae didn't divulge subscriber numbers directly, but advised Joon Mo Jun to sell Netflix shares when Netflix subscriber growth was lower than analysts expected. It seems that he was doing it.

Netflix has a corporate culture that emphasizes transparency within the company and is known for exposing sensitive inside information to employees. In 2020, CEO Reed Hastings wrote in NETFLIX, the world's most'free'company , Netflix probably closed its accounts internally a few weeks before the end of the quarter. It's the only public company to share. '

Spencer Wang, vice president of public relations for investors, said in the book that subscriber count information is usually 'secret' and that investors can use it to make a lot of money. When he joined Netflix, he not only received an email with the number of subscribers before the announcement of financial results, but also knew that all employees could sign up to know the number of subscribers. He was very surprised.