Three former Netflix employees along with two others have been charged for allegedly performing insider trading of Netflix.
The charges, pressed by the US Securities and Exchange Commission (SEC), accuse the five individuals of generating over $3 million in total profits by trading on confidential information about Netflix's subscriber growth.
According to the SEC's complaint, Sung Mo Jun, who is a former Netflix software engineer, headed a long-running scheme to illegally trade on non-public information concerning the growth of Netflix's subscriber base, a key metric Netflix reports for its quarterly earnings announcements.
The complaint alleges that Sung Mo Jun, while employed at Netflix in 2016 and 2017, repeatedly tipped subscriber growth 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 two other individuals, Ayden Lee and Jae Hyeon Bae, who still worked at Netflix at the time.
The Jun brothers and Chon allegedly tried to evade detection by using encrypted messaging applications and paying cash kickbacks.
The SEC's complaint was filed in a Seattle federal court, with the two Juns, Chon, Lee, and Bae each receiving a charge for violating the Securities Exchange Act's antifraud provisions.
The US Attorney's Office for the Western District of Washington has also raised a parallel action for the same charges.
In the most recent quarter, Netflix reported it gained an additional 1.54 million paying subscribers while unveiling plans to add video games to its service in a bid to expand its revenue streams.
At the start of this year, Netflix said it was spending $500 million for original content from South Korea this year alone.