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.