Goldman spying suspect no boon to new Chicago firm

By Svea Herbst-Bayliss and Steve Eder

BOSTON/NEW YORK (Reuters) - Their paths sound so similar - two Russian emigres with a talent for numbers who arrived in the United States and quickly moved into the rarefied circles of America's top investment firms.

But Mikhail Malyshev may now regret having crossed paths with countryman Sergey Aleynikov, a computer programer he hired for his start-up firm who is now embroiled in one of the highest profile U.S. corporate espionage cases in years.

Four days ago, federal agents charged Aleynikov, 39, with stealing trade secrets from his former employer, Wall Street bank Goldman Sachs Group Inc (GS.N). Malyshev's company, Teza Technologies LLC, responded by suspending Aleynikov.

The timing of the case could not be worse for Malyshev, who left hedge fund Citadel Investment Group in February to set up Teza Technologies with two partners, also previously employed at Citadel.

While the FBI has not accused Malyshev and Teza of wrongdoing, such a controversial court case involving one of its first employees could be at the very least a distraction and embarrassment, and could turn into the biggest challenge of Malyshev's career.

As news of the arrest captivates the hedge fund and banking communities, some details are emerging about how the men's careers collided.

Teza's spokesman Guy Chipparoni said Aleynikov was recruited through an outside headhunter, but it is unclear if there was much communication between the two men during the hiring process.

According to the U.S. complaint against Aleynikov, he left Goldman on June 5.

Requests to interview Malyshev were declined. Aleynikov did not return calls seeking comment.

IVY LEAGUE TO WHITE SHOE FIRMS

Former colleagues and a professor who taught him said Malyshev, known by the nickname Misha, is a brilliant mind who easily navigates the most theoretical areas of mathematics but can discuss finance in terms that laymen can understand.

"He was one of our very best students," said Nathaniel Fisch, director of the Program in Plasma Physics at Princeton University who supervised Malyshev's doctoral thesis in 1998.

"He had something extra, partly his ambitiousness and persistence and partly his flair. And he has street smarts."

Shortly after leaving the Ivy League school with a PhD in astrophysics, Malyshev abandoned science for business, accepting a position at McKinsey & Co, the consulting firm often hired by governments, large companies and investors.

In 2003, he was hired for the quantitative trading group of Chicago-based Citadel, one of the world's most aggressive hedge fund firms.