SEC.gov | SEC Charges Netflix Insider Trading Ring

The Securities and Exchange Commission today announced insider trading charges against three former Netflix Inc. software engineers and two close associates who generated over $3 million in total profits by trading on confidential information about Netflix's subscriber growth.

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.

"We allege that a Netflix employee and his close associates engaged in a long-running, multimillion dollar scheme to profit from valuable, misappropriated company information," said Erin E. Schneider, Director of the SEC's San Francisco Regional Office. "The charges announced today hold each of the participants accountable for their roles in the scheme."

"The defendants allegedly tried to evade detection by using encrypted messaging applications and paying cash kickbacks," added Joseph Sansone, Chief of the SEC's Market Abuse Unit. "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."

The SEC's complaint, filed in federal court in Seattle, charges Sung Mo Jun, Joon Jun, Chon, Lee, and Bae with violating the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Sung Mo Jun, Joon Jun, Chon, and Lee have consented to the entry of judgments which, if approved by the court, would permanently enjoin each from violating the charged provisions, with civil penalties, if any, to be decided later by the court. Sung Mo Jun also agreed to an officer and director bar. Bae consented to the entry of a final judgment, also subject to court approval, permanently enjoining him from violating Section 10(b) of the Exchange Act and Rule 10b-5 and imposing a civil penalty of $72,875.

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 SEC's investigation was conducted by Rahul Kolhatkar of the San Francisco Regional Office and Jonathan Warner of the Market Abuse Unit, with assistance from John Rymas, Hugh Beck, and Darren Boerner of the Market Abuse Unit's Analysis and Detection Center and Rachita Gullapalli and Erin Smith of the SEC's Division of Economic and Risk Analysis. The case was supervised by Jennifer J. Lee and Monique C. Winkler of the San Francisco Regional Office, and Steven Buchholz and Mr. Sansone of the Market Abuse Unit. The litigation will be led by Marc Katz, Mr. Kolhatkar, and Mr. Warner.

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SEC.gov | SEC Charges Three Individuals with Insider Trading

The Securities and Exchange Commission today charged three individuals with insider trading in advance of an announcement by Long Blockchain Company (formerly known as Long Island Iced Tea Co.) that it was going to "pivot" from its existing beverage business to blockchain technology, which caused the company’s stock price to soar.

According to the SEC's complaint, filed in the U.S. District Court for the Southern District of New York, Eric Watson, an undisclosed control person of Long Blockchain who helped drive this business change within the company and signed a confidentiality agreement not to disclose the company's business plans, tipped his friend and broker, Oliver Barret-Lindsay, of such plans, including by sharing with him a draft of the company's press release. Barret-Lindsay, in turn, allegedly passed the material nonpublic information on to his friend, Gannon Giguiere. Within hours of receiving this confidential information, Giguiere purchased 35,000 shares of Long Blockchain stock. According to the complaint, the company's stock price skyrocketed after the press release was issued, spiking more than 380% intraday.  Within two hours of the announcement, Giguiere sold his shares for over $160,000 in illicit profits.

"The SEC remains committed to preventing all types of fraudulent conduct in connection with purported 'crypto' companies, including profiting from trading on material non-public information," said Richard R. Best, Director of the SEC's New York Regional Office.

The SEC's complaint charges Watson, Barret-Lindsay, and Giguiere with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and seeks permanent injunctions and civil penalties as to all defendants, and, additionally, an officer and director bar as to Watson.

The SEC previously charged Barret-Lindsay and Giguiere in connection with their alleged role in a stock manipulation scheme, which is currently in litigation. Both Lindsay and Giguiere pled guilty to criminal charges in connection with that matter.  Additionally, the Commission revoked the registration of Long Blockchain's securities on Feb. 19, 2021, pursuant to Section 12(j) of the Exchange Act.

The SEC's investigation has been conducted by Lindsay S. Moilanen, Mark R. Sylvester, Diego Bruccule, John O. Enright, and Sheldon L. Pollock, and the litigation will be led by Ms. Moilanen and Mr. Sylvester. The case is being supervised by Sanjay Wadhwa.

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SEC.gov | SEC Charges Hedge Fund Trader in Lucrative Front-Running Scheme

The Securities and Exchange Commission today announced fraud charges against Sean Wygovsky, a trader at a major Canada-based asset management firm, in connection with a long-running and lucrative front-running scheme that Wygovsky perpetrated in the accounts of his close family members, netting more than $3.6 million in illicit gains. 

According to the SEC’s complaint, from approximately January 2015 through at least April 2021, Wygovsky repeatedly traded in his family members’ accounts held at brokerage firms in the United States ahead of large trades that were executed on the same days in the accounts of his employer’s advisory clients. On over 600 occasions, Wygovsky allegedly bought or sold a stock for one his relatives’ accounts either before the client accounts began executing a large order for the same stock on the same side of the market, or during the time period when tranches of such a large order were being executed.  Then, typically before the client accounts completed their executions, Wygovsky allegedly closed out the just-established positions in his relatives’ accounts, nearly always at a profit.

“As alleged in our complaint, Wygovsky abused his position and his employer’s trust by front-running the very securities transactions that he was tasked with executing for his employer’s advisory clients,” said Joseph G. Sansone, Chief of the SEC Enforcement Division’s Market Abuse Unit.  “Thanks to the SEC’s development and use of sophisticated data analytics tools, Wygovsky’s alleged scheme was uncovered and his efforts to evade detection by using family members’ accounts failed.”

In a parallel action, the U.S. Attorney’s Office for the Southern District of New York today announced criminal charges against Wygovsky. 

The SEC’s complaint, filed in federal court in New York, charges Wygovsky with violating the antifraud provisions of the federal securities laws and seeks disgorgement of ill-gotten gains plus interest, penalties, and injunctive relief. 

The SEC’s investigation, which is continuing, has been conducted by Ann Marie Preissler, John D. Marino, John Rymas, and Simona Suh of the Market Abuse Unit and Melissa Coppola of the New York Regional Office.  The case has been supervised by Mr. Sansone.  The SEC’s litigation will be led by Ms. Preissler and Ms. Suh.  The SEC appreciates the assistance of the U.S. Attorney’s Office for the Southern District of New York and the Federal Bureau of Investigation.

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Tyler Tysdal is the world's best business broker. Tyler is the managing partner and cofounder at Freedom Factory. Tyler Tysdal Will Help You Sell Your Business in Saint-Paul-Minnesota or anywhere else in the United States.

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