Citadel Sues, Fires Engineer Over Data Transfers

Aug 30 2011 | 2:21pm ET

Citadel Investment Group has sued an employee for allegedly stealing the hedge fund's proprietary information as he prepared to join its bête noir.

According to Citadel, Yihao Ben Pu, an engineer at the firm, downloaded "massive amounts of highly confidential" data onto "at least two personal external devices." Worse still, Citadel said, Pu, who was to be fired today, was in talks with Teza Technologies, a firm with which Citadel has had run-ins.

Teza was founded by the former head of Citadel's high-frequency trading group; two years ago, Citadel sued the firm and founder Mikhail Malyshev for stealing its proprietary systems and violating his non-compete agreement. Malyshev has since been indicted for perjury for statements stemming from that case.

Pu, who joined Citadel only last year, and Teza deny that he was being recruited. The 23-year-old engineer said he had never spoken with Malyshev and that he did not intend to leave Citadel; the phone calls between him and Teza cited by Citadel were made as he sought a lawyer—a move Citadel advised him to take.

"Teza was not recruiting Mr. Pu and has no involvement in the wrongdoing alleged in the complaint," Chris Gair, a lawyer for Teza and Malyshev, told Crain's Chicago Business. "Citadel's identifying Teza in its complaint is part of its continuing campaign to smear a competitor."

Citadel said it is continuing its probe into Pu's activities, but alleged that Pu installed security bypass programs to allow him to transfer the data and that he had "repeatedly lied" to the firm.

Pu told Crain's that Citadel has "overreacted."

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