Ex-Citadel Exec. Pays $1.1 Million For Destroying Evidence

Oct 19 2010 | 12:54pm ET

Mikhail Malyshev, the former Citadel Investment Group executive whose launch of a high-frequency trading firm led to a lawsuit from his former employers, has paid $1.1 million in sanctions for destroying evidence in the case.

A Chicago judge ordered Malyshev to cough up the money for "scrubbing" his computers despite a document-preservation order. Malyshev admitted irretrievably deleting the files but said he was only trying to destroy pornography and not any evidence related to the case.

Judge Mary Rochford wasn't buying it, calling Malyshev's actions "more egregious than anything" she had ever seen before.

"Malyshev has acted in disregard of the orderly administration of justice," she wrote. "He improperly and significantly disrupted the discovery practice and impaired the truth-seeking process for all parties."

Despite the harsh words, the sanction she imposed was fairly light-handed, covering only legal fees and costs. Citadel had asked for a $15 million penalty, which Rochford rejected as punitive.

At Citadel's request, the $1.1 million has been donated to two Chicago charities.

Last October, Rochford entered an injunction against Malyshev and Jace Kohlmeier, another former Citadel high-frequency trader, barring them from working on their newly-founded Teza Technologies until their non-compete agreements expired. She also barred them from hiring Citadel employees for a year, but refused to extend the non-competes.

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