Hedge fund employee charged with stealing quant computer code

An employee of Two Sigma Investments, a quantitative hedge fund firm with $18 billion in assets, has been arrested and charged by New York prosecutors with stealing computer data and a program from the firm.

Two Sigma sued Kang Gao this month in New York state court in Manhattan after he resigned, stating in the complaint that he had been arrested. Mr. Gao was charged Feb. 11 in Manhattan criminal court by District Attorney Cyrus R. Vance Jr., a person familiar with the case said.

Two Sigma claimed Mr. Gao quit after the fund learned he had “misappropriated confidential information as part of an apparent plan to take that information to a new employer, either one of Two Sigma's competitors in the United Kingdom, or to start his own business in China.”

According to Two Sigma, Mr. Gao allegedly accessed computer files created by its employees, used “decompiler” programs to view models hidden from some employees, and sent confidential information to his personal e-mail account. Mr. Gao “maintained that information on insecure servers — even after he confirmed, in writing, that he had destroyed it,” Two Sigma alleged.

Mr. Gao is charged with two counts of computer trespass, one count of unlawful duplication of computer-related material, one count of criminal possession of computer-related material and one count of unauthorized use of secret scientific material, according to the criminal complaint.

Benjamin Yu, an attorney who said he represented Mr. Gao at his arraignment, declined to comment on the charges. Stephen L. Ascher, an attorney with Jenner & Block representing Two Sigma in the lawsuit, also declined to comment.