NEW YORK (Reuters) - A former Societe Generale trader admitted he took home printouts of the French bank’s speed-trading code, admitted sharing it with a prospective employer and that it was wrong, an odd twist in the criminal trial over trade secrets theft.
The trial of Samarth Agrawal, a citizen of India, is expected to go to the jury in U.S. District Court in New York on Thursday or Friday, but the presiding judge all but called it over.
“Frankly, I’m puzzled by the present situation,” Judge Jed Rakoff said. “The defendant has admitted all essential elements of at least the first count of the indictment and probably the second count.”
Agrawal was arrested and charged in April with theft of trade secrets and a scheme to defraud. U.S. prosecutors said he stole code for SocGen’s lucrative high-frequency trading system last year so he could replicate it at his new job with Tower Research Capital LLC hedge fund.
Agrawal’s lawyer, Ivan Fisher, asked his client on the stand whether he understood the printouts of code he took to his apartment last year were proprietary to SocGen and Agrawal, 27, answered, “Yes.”
Asked whether he understood that it was wrong, Agrawal replied, “Yes.”
Agrawal, looking tense and close to tears in a dark suit, white shirt and silvery tie, testified that he shared aspects of the code with partners at Tower before a garden-leave period with SocGen ended in March this year.
When the lawyer asked Agrawal why he did it, he said after a long pause: “It made certain things easier. I had to make some steps of trading, instead of making it from my mind.”
Agrawal, who worked at SocGen’s New York office from March 2007 to November 2009, was arrested by the FBI on April 19, the day he was to start a higher-paying job at Tower. FBI agents found hundreds of pages of algorithmic code in his apartment.
High-frequency trading, or high-speed automated trading, has become an increasingly important business, generating millions in profits for banks and brokerages. The algorithmic code that each institution uses is a closely guarded secret.
The government has also charged a former Goldman Sachs Group Inc computer programer with trade secrets theft before he moved to a competitor. The trial of the programer, Sergey Aleynikov, is scheduled to start in the same court on November 29.
The trading in shares by computers takes place in milliseconds and it came under scrutiny by securities regulators after the May 6 stock market “flash crash.”
U.S. prosecutors Thomas Brown and Daniel Levy told the judge on Wednesday that, under sentencing guidelines, Agrawal could face imprisonment of between 46 months (3 years and 10 months) and 57 months (4 years and 9 months).
“One is driven to the inference of what is really going on here is a sympathy defense,” Rakoff said. “And indeed one would feel hard pressed not feel sympathy for this defendant.”
The bank, which said in April it reported the purported theft to law enforcement authorities, has declined comment on the trial, which began on November 8. Tower also declined to comment.
During the trial, there have been veiled references to the Jerome Kerviel scandal that rocked the French bank in 2008, particularly in the way it triggered changes in SocGen policy about employees working in the office at night, on weekends or at home. Kerviel, a rogue trader who nearly felled SocGen, was sentenced on October 6 to at least three years in prison and ordered to pay his former employers a fine equivalent to $6.8 billion.
The case is USA v Agrawal, U.S. District Court for the Southern District of New York, No. 10-417.
Reporting by Grant McCool; editing by Gerald E. McCormick and Andre Grenon