Friday, July 10, 2009

Forget, 'The Russians Are Coming'...

They are here...and infiltrating Wall Street's elite.

It turns out that Sergey Aleynikov may not be the only program trader leaving an elite firm with program trading data.

Citadel Investment Group, one of the world's most successful hedge fund firms, has sued Mikhail Malyshev and two other former employees who allegedly violated their non-compete clauses by starting their own firm, Teza Technologies LLC.

Teza is the firm that Aleynikov joined when he left Goldman.

Malyshev is a Russian emigre with a doctorate in astrophysics from Princeton, who left Citadel's quantitative trading unit in February after the funds he helped run returned about 40 percent last year. Their performance stood out at a time when most hedge funds lost money.

In its lawsuit, Citadel said it zealously guards the secrecy of its own computer codes. The firm said it spent hundreds of millions of dollars to develop strategies, software and hardware.

A spokesman for Teza told Reuters columnist Matthew Goldstein that the firm had voluntarily turned over some of its computers to the Federal Bureau of Investigations and said that the suit was "frivolous" and said it "appears to be timed to harass Teza executives."

"We knew nothing about the theft of Goldman's software until it hit the press in connection with the arrest," said Chris Gair, Teza's lawyer. "We immediately started working with the FBI. We are not going to compromise anyone's proprietary information."

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