Skip to main content
MENU
Subscribe
  • Sign Up Free
  • LOGIN
  • Subscribe
  • Topics
    • Alternatives
    • Consultants
    • Coronavirus
    • Courts
    • Defined Contribution
    • ESG
    • ETFs
    • Face to Face
    • Hedge Funds
    • Industry Voices
    • Investing
    • Money Management
    • Opinion
    • Partner Content
    • Pension Funds
    • Private Equity
    • Real Estate
    • Russia-Ukraine War
    • SECURE 2.0
    • Special Reports
    • White Papers
  • Rankings & Awards
    • 1,000 Largest Retirement Plans
    • Top-Performing Managers
    • Largest Money Managers
    • DC Money Managers
    • DC Record Keepers
    • Largest Hedge Fund Managers
    • World's Largest Retirement Funds
    • Best Places to Work in Money Management
    • Excellence & Innovation Awards
    • WPS Innovation Awards
    • Eddy Awards
  • ETFs
    • Latest ETF News
    • Fund Screener
    • Education Center
    • Equities
    • Fixed Income
    • Commodities
    • Actively Managed
    • Alternatives
    • ESG Rated
  • ESG
    • Latest ESG News
    • The Institutional Investor’s Guide to ESG Investing
    • ESG Sustainability - Gaining Momentum
    • Climate Change: The Inescapable Opportunity
    • Impact Investing
    • 2022 ESG Investing Conference
    • ESG Rated ETFs
  • Defined Contribution
    • Latest DC News
    • DC Money Manager Rankings
    • DC Record Keeper Rankings
    • Innovations in DC
    • Trends in DC: Focus on Retirement Income
    • 2022 Defined Contribution East Conference
    • 2022 DC Investment Lineup Conference
  • Searches & Hires
    • Latest Searches & Hires News
    • Searches & Hires Database
    • RFPs
  • Performance Data
    • P&I Research Center
    • Earnings Tracker
    • Endowment Returns Tracker
    • Corporate Pension Contribution Tracker
    • Pension Fund Returns Tracker
    • Pension Risk Transfer Database
    • Future of Investments Research Series
    • Charts & Infographics
    • Polls
  • Careers
  • Events
    • View All Conferences
    • View All Webinars
    • 2023 Defined Contribution East
    • 2023 ESG Investing
Breadcrumb
  1. Home
  2. HEDGE FUNDS
January 10, 2020 01:37 PM

Citadel Securities says GSA stole data while recruiting trader

Bloomberg
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print
    Bloomberg
    Citadel Securities is seeking to block GSA Capital from ever using Citadel’s proprietary algorithm.

    A British hedge fund firm's attempt to hire a senior trader from Citadel Securities has landed it in a London lawsuit filled with allegations that it obtained a secret trading strategy while using texts and Whatsapp messages to hide all traces of the plan.

    GSA Capital LLP accessed confidential information on a crucial automated trading model that cost Citadel more than $100 million to develop, the U.S. market maker said in a London court filing. In the latest case to highlight how far financial firms will go to protect trading ideas, Ken Griffin's firm is seeking to block GSA from ever using the algorithm.

    GSA's attempted recruitment of Vedat Cologlu was marked by the fund's strict instruction to the trader to avoid emails and stick to Whatsapp messages and texts, Citadel said in its account of his hiring. Mr. Cologlu was to be a key part of GSA's plan to set up a new high frequency trading business.

    But Citadel claims the fund wanted more. GSA asked for sensitive information on his equity-trading including his profits and the speed of the trades. And then Mr. Cologlu handed over a plan that Citadel argues was based on its own confidential model, including the way the algorithm made predictions.

    The case, filed last month, lays out the steps that funds will take to protect automated strategies where companies deploy computing power to identify trades promising the biggest mismatches or largest payoffs with the least amount of risk. British quantitative research fund G-Research pursued a yearslong case against a former analyst, seeing him sentenced three times for stealing confidential strategies.

    GSA was spun out of Deutsche Bank in 2005 and manages around $7.5 billion. Citadel's legal filing names GSA founder and majority owner Jonathan Hiscox as a defendant, alongside other officials including the chief technology officer. It has yet to file its formal defense, but said Wednesday it rejects the claims and plans to vigorously defend itself.

    ‘ABC strategy'

    At the center of this case is Citadel's "ABC strategy," a closely guarded algorithm that was generating more than $50 million a year trading stocks in the U.S. and Europe. Mr. Cologlu helped operate and administer the models, and as they stepped up hiring plans GSA officials were told that the returns were notably high given the low level of risk it took on.

    GSA officials must have been aware of the need for secrecy, Citadel argued, because they regularly sought to keep details of the courtship out of emails where they could be easily discovered. In May 2019, GSA's head of recruitment Douglas Ward emailed a junior employee saying that the job interview questions be "Kept off e-mail."

    "GSA well knew that Mr. Cologlu's responses would contain or would be derived from Citadel's confidential information and hoped to conceal their wrongful conduct," Citadel's lawyers said in the filing dated Dec. 16.

    Trading firms and hedge funds, who have for long used fat pay checks to lure employees, are engaged in an intense battle to hire and retain talent. The latest front line is to recruit technologists who are seen as key to future-proof trading strategies.

    Mr. Cologlu, who earned more than $700,000 in 2018 as a quant researcher, was looking for a move after 11 years at Citadel. The firm cited messages saying Mr. Cologlu was keen to build out his own business and believed there was a market to trade European stocks. GSA for its part dubbed the plan "Project High Speed Rail" and was making moves to enter the high-speed algorithmic trading business by joining the Turquoise trading facility run by the London Stock Exchange, according to the lawsuit.

    ‘Called out'

    But by June, Citadel learned that Mr. Cologlu sent the trading plan to his work email account and began investigating. The GSA recruiter speculated Mr. Cologlu had "been called out by Citadel."

    It was an accurate guess. Mr. Cologlu told Citadel's legal team that he'd provided GSA with the trading strategy plan. According to the lawsuit, Mr. Cologlu has been suspended, but a person familiar with the situation said he has left the company.

    Citadel says that after GSA was confronted about its meetings with Mr. Cologlu, an internal lawyer agreed to cooperate and shredded the hard copies of Mr. Cologlu's trading plan.

    In addition to damages, Citadel is seeking an injunction to stop GSA from using any of its confidential information. It has also asked a judge to order GSA to destroy all paper and computer copies of the information.

    Related Articles
    Citadel promotes James Yeh to president and co-CIO
    Citadel's Ken Griffin gives $125 million to Chicago museum; name will change
    Citadel hires ex-Goldman trading head to run credit
    Recommended for You
    Karen Karniol-Tambour
    Bridgewater promotes Karen Karniol-Tambour to co-CIO
    Brandon Baer
    Bankruptcy-litigation hedge funds see potential in Genesis, FTX collapse
    ken_griffin_citadel_1550-main_i.jpg
    Citadel's $16 billion win tops Paulson's greatest trade ever
    The Institutional Investor's Guide to ESG Investing
    Sponsored Content: The Institutional Investor's Guide to ESG Investing

    Reader Poll

    January 25, 2023
    SEE MORE POLLS >
    Sponsored
    White Papers
    Show Me the Income: Discovering plan sponsor and participant preferences for cr…
    Morningstar Indexes' Annual ESG Risk/Return Analysis
    The Future of Infrastructure: Building a Better Tomorrow
    Outlook 2023: Opportunity in a volatile world
    Research for Institutional Money Management
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today
    December 12, 2022 page one

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    130 E. Randolph St.
    Suite 3200
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Content Solutions
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2023. Crain Communications, Inc. All Rights Reserved.
    • Topics
      • Alternatives
      • Consultants
      • Coronavirus
      • Courts
      • Defined Contribution
      • ESG
      • ETFs
      • Face to Face
      • Hedge Funds
      • Industry Voices
      • Investing
      • Money Management
      • Opinion
      • Partner Content
      • Pension Funds
      • Private Equity
      • Real Estate
      • Russia-Ukraine War
      • SECURE 2.0
      • Special Reports
      • White Papers
    • Rankings & Awards
      • 1,000 Largest Retirement Plans
      • Top-Performing Managers
      • Largest Money Managers
      • DC Money Managers
      • DC Record Keepers
      • Largest Hedge Fund Managers
      • World's Largest Retirement Funds
      • Best Places to Work in Money Management
      • Excellence & Innovation Awards
      • WPS Innovation Awards
      • Eddy Awards
    • ETFs
      • Latest ETF News
      • Fund Screener
      • Education Center
      • Equities
      • Fixed Income
      • Commodities
      • Actively Managed
      • Alternatives
      • ESG Rated
    • ESG
      • Latest ESG News
      • The Institutional Investor’s Guide to ESG Investing
      • ESG Sustainability - Gaining Momentum
      • Climate Change: The Inescapable Opportunity
      • Impact Investing
      • 2022 ESG Investing Conference
      • ESG Rated ETFs
    • Defined Contribution
      • Latest DC News
      • DC Money Manager Rankings
      • DC Record Keeper Rankings
      • Innovations in DC
      • Trends in DC: Focus on Retirement Income
      • 2022 Defined Contribution East Conference
      • 2022 DC Investment Lineup Conference
    • Searches & Hires
      • Latest Searches & Hires News
      • Searches & Hires Database
      • RFPs
    • Performance Data
      • P&I Research Center
      • Earnings Tracker
      • Endowment Returns Tracker
      • Corporate Pension Contribution Tracker
      • Pension Fund Returns Tracker
      • Pension Risk Transfer Database
      • Future of Investments Research Series
      • Charts & Infographics
      • Polls
    • Careers
    • Events
      • View All Conferences
      • View All Webinars
      • 2023 Defined Contribution East
      • 2023 ESG Investing