http://www.valuewalk.com/2015/01/fo...m_campaign=EMAIL_DAILY&utm_content=quick_link January 15, 2015 Ameet Sachdev Chicago Tribune Posted with permission from MCT Information Services Republish Reprint CHICAGO — A former computer engineer at Citadel was sentenced to three years in prison Thursday for stealing trade secrets from the Chicago-based hedge fund founded by billionaire Ken Griffin. Attorneys for Yihao "Ben" Pu had asked for no jail time for the 27-year-old Ivy League graduate from Boston because he hadn't caused any financial losses to Citadel. Pu pleaded guilty in August to two counts of illegally downloading confidential information about the hedge fund's computerized trading system. U.S. District Judge Charles Norgle said Pu's crimes were too serious to ignore and going to prison would serve as a deterrent to others. But the judge also said the federal sentencing guidelines that called for a minimum 87-month sentence overstated his actions. The judge said he took into account that there was no actual loss to Citadel, but he agreed with prosecutors that Pu intended for Citadel to suffer a monetary loss. Pu worked in Citadel's high-frequency trading unit that makes large volumes of trades in securities in fractions of a second. Citadel developed mathematical formulas known as algorithms to predict the movement of stocks, bonds and other securities. The algorithms are incorporated in computer programs that automatically execute the trades. Citadel's success at computerized trading have helped make the hedge fund one of the largest in the world, with $24 billion in assets, according to published reports. High-speed traders closely guard their technology and algorithms. Citadel, for example, blocked USB ports on their computers to make it harder for employees to download information onto portable hard drives. According to his plea agreement, Pu took certain trading signals, called "alpha data" and "term data," generated by Citadel computer source code. Citadel's policies bound Pu to keep confidential proprietary information and prohibited him from copying such information, prosecutors said. Starting in May 2011, Pu found a way to download thousands of files containing alpha and term data to his personal hard drive and other electronic storage devices "for his own benefit," according to the plea deal. After company officials confronted him that August, Pu enlisted the help of a colleague, Sahil "Sonny" Uppal, to remove hard drives containing the firm's confidential information and other computer equipment from Pu's apartment. Some of the hard drives were dumped into a sanitary canal, according to court documents. Divers hired by Citadel retrieved the equipment. Pu faced more than 20 charges including wire fraud, computer fraud and obstruction. Uppal, who pleaded guilty in August to obstructing an investigation into Pu's theft, was sentenced to three years of probation Thursday by Judge Norgle. Pu and Uppal joined Citadel in 2010 after working together at Tradeworx, a New Jersey trading firm. In his guilty plea in the Citadel case, Pu also confessed to taking proprietary computer code from Tradeworx. Before sentencing, Pu apologized for his conduct, calling it the "most regrettable actions of my life." He also said he had brought shame to his family and turned around and apologized to his parents. Judge Norgle said he believed Pu was remorseful and had accepted responsibility for his actions. The judge also praised him for teaching computer courses to children since he was charged in 2011. The judge also said there was not enough evidence to suggest Pu had some other plans for the stolen confidential information such as sharing it with a competitor or starting his own trading firm. Pu used Citadel's information to trade in his own brokerage account but lost money. Pu's sentence matches that of Samarth Agrawal, a New York trader who stole his employer's high-speed trading software.
The title makes no sense. Pu received three years in prison. His accomplice got probation. Boston U is now Ivy?!?!
fully agree, in addition it shows most those guys know next to nothing, they are hired into hft departments for information they can deliver about their previous employer's environment and code base. Most of the core algorithms are developed by 2-3 guys that are paid so well and sign such stringent contracts that it is not worth their while to even consider jumping ship. Everyone else is just cannon fodder and either programs well to justify their salaries or offers illegally obtained information. Those that generate the true alpha-generating ideas are a very rare breed. Certainly it was not Mr. Poo...
Plus, those alpha-generating ideas lose their edge eventually. I knew a HFT who made a lot of money (several hundred percent on base capital per year) for several years, but then couldn't afterwards. A mistake on the title. Wish I could edit it.