The Securities and Exchange Commission announced charges against three former Netflix employees and two associates they say racked up more than $3 million in profits by peddling confidential data about the streaming giant.
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The complaint, filed in federal court in Seattle this week, accused three software engineers and two associates of illegally trading using confidential information about Netflix's growing pool of subscribers.
Investigators say engineer Sung Mo "Jay" Jun repeatedly tipped off his brother, Joon Mo Jun, and close friend Junwoo Chon while working for the company from 2016 to 2017. The complaint said the two used the information to trade several times ahead of Netflix's quarterly earnings announcements.
After leaving the company, prosecutors say the software engineer relied on two former colleagues, Auden Lee and Jae Hyeon Bae, still working at Netflix to relay insider information. On these occasions, Sung Mo Jun used the tips to make trades for himself and gave the information to the two people he had previously.
In all, the SEC estimates the trio profited approximately $3 million from the illegal trades.
The culprits thought they were evading law enforcement by using encrypted messaging apps. But the likelihood of making trades that profitable is what gave the three away.
Investigators from the SEC's Market Abuse Unit in San Francisco uncovered the insider dealing by scientifically analyzing trading data. The unit's analytical tools detect suspicious trading patterns and market manipulations.
"This case reflects our continued use of sophisticated analytical tools to detect, unravel, and halt pernicious insider trading schemes that involve multiple tippers, traders, and market events," said unit chief Joseph Sansone.
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