The big stakes legal action may be taking place in a court in lower Manhattan, where Raj Rajaratnam is on trial for trading with insider information.
But, 800 miles away in an Illinois court, a former tech hotshot at another major, high-profile hedge fund has also been hauled into court.
Mikhail Malyshev, who worked for Chicago-based Citadel Investment Group for six years, was indicted on two counts of perjury stemming from a dispute over the possible theft of critical company secrets, proprietary computer code, according to Cook County Sheriff Thomas J Dart.
In February 2009, the dual citizen of the United States and Russia and co-worker Jace Kohlmeier left Citadel, where he earned more than $200 million, according to Dart’s announcement. One month later Malyshev, who developed the computer code that controlled the company’s high frequency trading strategies, formed his own company, Teza Technologies LLC.
According to the Cook County Sheriff, in July 2009 Citadel filed a lawsuit alleging Malyshev stole trade secrets and violated a covenant not to compete. Immediately after the lawsuit was filed, both parties entered into a protective order, agreeing not to delete electronic information within their control.
However, according to Dart, months later, during a deposition Malyshev admitted to running a “scrubbing” software program on two home computers, but claimed it was only “for a few minutes” in order to delete embarrassing pornographic images from the hard drive.
As it turned out, he actually ran the programs for 41 minutes on one computer and nearly two hours on another, the Sheriff asserted. “As a result, a significant quantity of data was permanently destroyed,” he added.
Malyshev, however, subsequently filed a sworn affidavit claiming he had not deleted any “active files” from his computers. He made this same assertion during a court hearing in September 2009.
The Sheriff said, however, that computer forensics showed that Malyshev—a one-time plasma physicist—deleted active files from his computers in addition to running the scrubbing program.
When he was confronted with these facts, Malyshev admitted he had lied in his affidavit, at his deposition, and in court. He was then charged with perjury.
Back in October, Malyshev paid $1.1 million to two Chicago charities after a Cook County judge ordered him to pay a civil fine stemming from the same incident.
Does the name Teza sound familiar? Well, it just happens to be the same company where former Goldman Sachs computer programmer Sergey Aleynikov was criminally charged of stealing high-frequency trading code from his former employer, Goldman Sachs, where he served as VP of its Equity Trading Division. In December, the Russian was found guilty of theft of trade secrets and transporting stolen property.
Aleynikov, who is to be sentenced on Friday, faces up to 15 years in prison.
