U.S. SEC, federal prosecutors charge former Netflix staffers with insider trading

FILE PHOTO: The Netflix sign-on is shown on an iPad in Encinitas

By Katanga Johnson

WASHINGTON (Reuters) – The U.S. Securities and Exchange Commission (SEC) said on Wednesday it has charged three former engineers at Netflix Inc with trading on nonpublic information around the company’s subscriber growth that generated over $3 million in total profit.

The SEC’s complaint, filed in federal court in Seattle, charges the streaming service’s ex-staffers with violating antifraud provisions and trying to evade detection by using encrypted messaging applications. It also found that the staffers exchanged the information with relatives and friends so as to receive cash kickbacks in advance of several consecutive Netflix quarterly earnings, the SEC said.

The defendants may also pay fines, the SEC said.

In a parallel action, the U.S. Attorney’s Office for the Western District of Washington filed a criminal information against the defendants, which could lead to time spent in prison.

“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 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.”

“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.”

(Reporting by Katanga Johnson in Washington; Editing by Diane Craft and Matthew Lewis)