SEC Charges Video Streaming Service Employees with Insider Trading

The SEC charged five individuals with trading on material non-public information related to a subscription video streaming service's subscriber growth. The scheme involved three former employees who worked as software engineers and two closely associated individuals.

In a Complaint filed in the Seattle Division of the U.S. District Court for the Western District of Washington, the SEC alleged that the employee at the center of the scheme informed the two closely associated individuals of material non-public information about the service's subscriber base, a critical component to quarterly earnings announcements. The SEC stated that the two closely associated individuals then used the information to trade ahead of a number of the platform's earnings announcements. After leaving the company, the employee at the center received additional insider information from two former colleagues still employed by the company, trading on the information along with the two closely associated individuals. The SEC claimed that the former employee and the two closely associated individuals ultimately profited by nearly $3 million as a result of the scheme.

The SEC charged all five individuals with violations of Section 10(b) ("Regulation of the Use of manipulative and deceptive devices") of the Exchange Act and SEA Rule 10b-5 ("Employment of manipulative and deceptive devices") thereunder. To settle the charges, four of the individuals agreed to permanent injunctions, with the amount of any civil penalties to be determined by the court. One employee agreed to be barred as an officer and director. The fifth individual agreed to a permanent injunction and to pay a civil penalty of $72,875. The settlement agreements are subject to court approval.

The U.S. Attorney's Office for the Western District of Washington filed a criminal information against four of the individuals in a parallel action.

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