Friend who profited from trading on privileged information also gets prison sentence
Seattle – A former Netflix software engineer, and his best friend and co-conspirator were sentenced today in U.S. District Court in Seattle for securities fraud for their roles in an insider trading ring that generated more than $3 million in illegal proceeds, announced U.S. Attorney Nick Brown. Sung Mo Jun, 49, of Bellevue, Washington, was sentenced to 2 years in prison and a $15,000 fine. His friend and co-conspirator Junwoo Chon, 50, of Bellevue, Washington, was sentenced to 14 months in prison and a $10,000 fine. At the sentencing hearings U.S. District Judge Richard A. Jones said he hoped the prison time would deter others. “For people in the high tech industry, they will clearly know that there are consequences – including prison time – for this activity,” Judge Jones said.
“Insider trading is a serious offense,” said U.S. Attorney Nick Brown. “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. 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.”
“Insider trading undermines our capital markets, harms companies by misusing their confidential information, and causes investors to lose faith in the fairness of the system,” said Donald M. Voiret, Special Agent in Charge, Seattle Field Office. “The actions of this trusted employee and his friend were calculated and ongoing to reap a huge profit.”
According to records filed in the case, from July 2016 to February 2017, Sung Mo Jun was employed by Netflix as a software engineer. He had access to subscriber data and had been trained by the company that such data was material, non-public information. Nevertheless, Jun disclosed that 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. After Chon made significant profits on the securities, Sung Mo Jun asked Chon to provide Sung Mo Jun with $60,000 in cash as Sung Mo Jun’s share of the profits.
After Sung Mo Jun left Netflix, he obtained additional non-public information about subscriber data from another Netflix employee, software engineer Ayden Lee, 33, of San Jose, California. Jun not only passed that information on to his brother and Chon, he also used it to make his own trades. 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
Sung Mo Jun also obtained insider information from a “tipper” he knew at another tech company and shared this information with his brother and Chon. Their profits from trading on that inside information was less than $2,000.
In addition to the prison sentences, both men will be on one year of supervised release following prison and must complete 50 hours of community service.
As Judge Jones imposed the sentence, he told Jun “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.”
Jun told the court, “What I did was foolish, wrong, illegal…. I have no excuse. I disappointed many people.”
Jun is forfeiting $495,188 to the U.S. and Chon is forfeiting $1,582,885 to the U.S. The forfeiture amounts are based on the illegal gain by each defendant.
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 (SEC) 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.
The case was investigated by the FBI and is being prosecuted by Assistant United States Attorney Justin Arnold.