| March 11
March 11 A former analyst for hedge fund Two
Sigma Investments LLC was indicted in New York on Tuesday on
state charges he stole information about the fund's confidential
computer trading models.
Kang Gao, a Chinese national who worked as an analyst for
the fund, was indicted on 11 felony counts related to the theft
and copying of secret information about the hedge fund's trading
methods, according to an indictment released by Manhattan
District Attorney Cyrus Vance.
Gao has pleaded not guilty. His attorney, Benjamin Yu, did
not return a request for comment.
"The protection of trade secrets, such as computer source
codes and trading methods, is critical to building and
maintaining financial expertise," Vance said in a statement.
Gao, 29, was hired in 2010 as a quantitative analyst for Two
Sigma, prosecutors said. Between August and January, Gao
remotely accessed computers at Two Sigma Investments and emailed
himself documents describing the fund's computer trading models,
according to the indictment.
Gao's employment contract prohibited him from viewing the
trading models, prosecutors said.
Gao also is facing a civil lawsuit brought by Two Sigma, in
which the hedge fund claims he planned to sell the allegedly
stolen data or use it to start his own trading firm. The suit,
which was brought in Manhattan state court, claims Gao made
nearly $550,000, including bonuses, working for the firm in
Two Sigma says in the lawsuit it fired Gao in February when
it learned that he had accessed confidential trading models.
Two Sigma Investments was formed in 2001 and manages about
$14 billion, according to the lawsuit. It specializes in
quantitative trading, in which firms use sophisticated and
highly confidential modeling programs to find patterns within
Fund spokeswoman Kelly Howard said: "Two Sigma takes the
protection of our intellectual property very seriously. We
became aware of potential felony criminal activity of an
employee, promptly informed the Manhattan District Attorney and
terminated his employment."
Gao's case is the latest bid by Vance to crack down on
high-tech white-collar crime. He has called existing laws
outdated, saying the penalties for cybercrimes do not match the
In 2012, a federal appeals court overturned the conviction
of Sergey Aleynikov, a computer programmer who was charged by
federal prosecutors with stealing computer code from Goldman
Sachs. The court found that computer code was not a "stolen
good" under federal law. Months later, Vance's office charged
Aleynikov under state law with the same crimes for which Gao was
indicted on Tuesday. Aleynikov has pleaded not guilty.