A “highly valuable” trading strategy developed by Citadel Securities at a cost of more than $100m is at the centre of a High Court lawsuit filed by the Chicago-based market maker against a London rival.
Citadel is suing GSA Capital Partners and five senior GSA executives, alleging they induced a Citadel employee to supply “proprietary and highly confidential information” to GSA. The secret information allegedly included details of a key Citadel trading strategy which it says “generates many millions of dollars each year”.
In a lawsuit filed at the High Court in London, Citadel says core features of its trading strategies include algorithms which it “invests vast sums” in developing, and which are highly confidential.
Citadel alleges that a senior manager and quantitative researcher, Vedat Cologlu, was induced by GSA to supply sensitive material including information from one of Citadel’s trading strategies — which is referred to as the ABC strategy.
Mr Cologlu was paid $700,000 in 2018 by Citadel but was considering jumping ship in late 2018 to set up a new team at GSA, the lawsuit states. The court documents claim that information allegedly handed over in a hard copy document by Mr Cologlu was among Citadel’s “most sensitive confidential information relating to certain of its most valuable algorithmic trading strategies.”
The trader was instructed to communicate with GSA using WhatsApp and by text message and provide hard copy documents as he proposed setting up a new team at GSA, Citadel alleges in the court filings. He was suspended by Citadel in June 2019 and is not listed as a defendant in the lawsuit.
Mr Cologlu could not immediately be contacted for comment. He no longer works for Citadel, according to a person with knowledge of his status.
Citadel is claiming that GSA and the senior executives knowingly received and misused the company’s confidential information and were parties to an “unlawful means” conspiracy. It is asking the High Court to award damages and an injunction stopping use of the information, and is seeking details of any profits made using the information.
A spokesperson for GSA said the company and the individual defendants reject the claims made and the case will be defended vigorously.
In recent years, high-frequency trading firms such as Citadel have been investing millions in technology and artificial intelligence, as investor demand for rapid-fire trading strategies has boomed. Such information has become highly valuable and securities firms have on occasion turned to the courts to protect the material.
In 2015, Ke Xu, a hedge fund analyst, was jailed for four years for fraud at Southwark Crown Court after accessing and copying “extremely valuable” computer code used in trading algorithms when he worked for Trenchant Ltd, which was linked to the quantitative hedge fund G-Research.