Ex-Citadel Exec. Sued By Hedge Fund Admits Destroying Computer Files

Oct 1 2009 | 3:12am ET

A former top Citadel Investment Group executive has admitted that he destroyed data on his computer, but denied that he did so to conceal evidence in a lawsuit filed by his former employer. Mikhail Malyshev, the former head of Citadel’s high-frequency trading group, also denied that an employee of his new firm, Teza Trading, had uploaded software allegedly stolen from Goldman Sachs.

Citadel has sued Malyshev and Jace Kohlmeier, another former employee, alleging the two men violated their non-compete agreement with the firm when the set up Teza. The two men counter that they are not actually competing, but merely laying the groundwork for the new firm.

During a hearing yesterday, Malyshev admitted that he had used scrubbing software on his computer to irretrievably delete some files. But he told Citadel lawyer Brian Sieve that “it was not my intent to destroy evidence related to this case.” Malyshev said he was simply trying to remove any trace of adult videos he didn’t want discovered, despite the fact that his lawyers had reached an evidence-preservation accord with the judge earlier that day.

“It was a panicked decision, a stupid one,” he said.

Malyshev also denied that Sergey Aleynikov, the Teza employee arrested for allegedly stealing code from Goldman Sachs, where he had worked, had uploaded that material to Teza’s computers. Malyshev said that Aleynikov, who has been suspended from Teza, did upload third-party code to Teza’s computers, “we know it’s not” the Goldman code, he testified. He added that three of Teza’s computers, a server and other data storage remain in the hands of the Federal Bureau of Investigation, which is probing the alleged Goldman theft.

Malyshev is due back on the stand in the Chicago state court tomorrow to be questioned by his own attorney.

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