The U.S. Securities and Exchange Commission charged three former Netflix Inc. software engineers and two others with participating in an insider trading ring that netted the group more than $3 million in profits, the agency said Wednesday.

The group allegedly relied on nonpublic information about the growth in Netflix’s

subscriber base — a key metric on Wall Street for gauging the company’s prospects — to buy and sell Netflix securities between July 2016 and July 2019, according to a complaint filed in federal court in Seattle.

Sung Mo “Jay” Jun, a former software engineer at the company, allegedly led the insider trading ring, accessing data on subscriber growth and sharing it with his brother Joon Mo Jun and friend Junwoo Chon, so they could trade Netflix securities ahead of earnings announcements. After Jun left the company, he relied on another Netflix insider and friend Ayden Lee to supply him with the information, the complaint alleged.

The ring used encrypted messaging applications to share the inside information and executed insider trades ahead of 13 separate earnings announcements, the complaint said.

The SEC said that it caught the illegal trades using data analysis tools that can detect when traders have improbable levels of success trading the securities of company over a period of 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 in a press release. “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.”

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