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Wealthy Netflix engineer and his pal are sentenced to prison for insider trading scheme

A former Netflix engineer and his pal have been sentenced to prison over an insider trading conspiracy in which they used secret information about the company's subscriber numbers to profit from stock trades.

Sung Mo Jun, 49, of Bellevue, Washington, was sentenced to two years in prison on Friday for masterminding the complex and long-running scheme that continued even after he left the company.

His buddy Junwoo Chon, 50, was sentenced to 14 months in prison and a $10,000 fine for his role, after prosecutors said he coordinated with Jun to execute trades and paid the Netflix engineer kickbacks.

At the sentencing hearings U.S. District Judge Richard A. Jones slammed the already wealthy Jun for hatching the brazen plot, saying, 'You had no reason to pursue this additional wealth, and yet you chose to engage your brother and best friend in this scheme. There is just one reason: greed.' 

Sung Mo Jun, 49, of Bellevue, Washington, was sentenced to two years in prison on Friday for masterminding the complex and long-running insider trading scheme

Jun told the court: 'What I did was foolish, wrong, illegal…. I have no excuse. I disappointed many people.' 

Insider trading, which is often difficult to prosecute, refers to buying or selling stock based on material, non-public information about a company in order to reap a windfall or avoid a loss.  

'Insider trading is a serious offense,' said U.S. Attorney Nick Brown in a statement. 

'Such conduct damages our financial markets and erodes public trust because the investing public needs to have faith that the markets provide an even playing field to all participants,' he added.

'Mr. Jun and Mr. Chon were both financially secure with good jobs and good salaries when greed drove them to break the law to increase their own wealth, at the expense of others. Such conduct, will not be tolerated,' said Brown.

Prosecutors say that from July 2016 to February 2017, Jun was employed by Netflix as a software engineer, where he had access to secret data showing the company's growth in paying subscribers.

Prosecutors say that from July 2016 to February 2017, Jun was employed by Netflix as a software engineer, where he had access to secret subscriber data

This data is normally released to the public once every three months during the company's quarterly reports, and a surprise in the numbers can affect Netflix's stock price dramatically.

Jun disclosed the information to his brother Joon Jun, 45, of Issaquah, Washington, and his close friend, Junwoo Chon, knowing that the two intended to use the information to profit on the purchase and sale of Netflix securities, prosecutors say.

After Chon made significant profits on the securities, Sung Mo Jun asked Chon to provide Sung Mo Jun with a $60,000 cash kickback as Sung Mo Jun's share of the profits. 

Prosecutors say the scheme continued even after Sung Mo Jun left Netflix, when he obtained additional secret information about subscriber data from another Netflix employee, software engineer Ayden Lee, 33, of San Jose, prosecutors said.

Jun not only passed that information on to his brother and Chon, he also used it to make his own trades. 

Prosecutors say the scheme continued even after Sung Mo Jun left Netflix, when he obtained additional secret information about subscriber data from another Netflix employee

Between April 2017, and July 2019, Sung Mo Jun made a profit of $434,086 by trading in Netflix stock and options with this inside information. 

Between July 2016 and April 2017, Jun's brother, Joon Jun, made $215,419 and co-conspirator Junwon Chon made $521,400. 

All told, the insider trading attributable to Sun Mo Jun in Netflix securities resulted in an illicit gain of $1,170,905. Chon is responsible for illicit profits of $1,642,855.

The two remaining conspirators will be sentenced next year. Joon Jun is responsible for illicit profits totaling $1,106,208. Lee is connected to illicit profits totaling $453,465.

The Securities and Exchange Commission has filed a separate civil enforcement action against the defendants who have each entered into settlements with the SEC. Both men still face potential penalties from the SEC.