A former hedge fund quantitative analyst admitted to stealing trade secrets from his former employer, and may soon be deported to China
Kang Gao, 29, worked for Two Sigma investments, LLC. He is a graduate of Peking University and MIT and he was in the US on a work visa.
According to Forbes, Gao’s 2013 salary and bonuses totaled $547,000.
Gao pled guilty to unlawful duplication of computer-related material, a felony. He had faced four other felony charges, including computer trespass.
According to Manhattan District Attorney Cyrus R. Vance, Gao used decompiler programs to see Two Sigma’s trading models, and then emailed that information to his personal Gmail account.
He also allegedly took trading strategies, a marketing presentation, and a white paper.
According to Vance, “Computer source codes and proprietary trading methods are often the lifeblood of a company’s business model, and stealing them is a crime.”
Prosecutors said that Gao went to China to meet with potential investors about setting up a financial business there. He also interviewed with competing hedge funds.
Gao was arrested during his exit interview with Two Sigma, as he was preparing to start a new job at Citadel LLC in Chicago.
Gao has already spent most of a year in jail. He is expected to be sentenced on April 28 to time served and deported to his homeland. Before the plea bargain, he faced a maximum of four years in prison if convicted.
Two Sigma also brought a civil case against Gao, three days after his arrest. The judge in that case called it a “garden-variety” employment dispute and questioned whether the criminal charges were overkill.
The judge noted that he had presided over many employer/employee cases and that this was the first one in which a company had put former employee in jail for “allegedly breaching the covenant of confidentiality or the nonsolicitation covenant with respect to trade secrets.”
The judge suggested that the case could lead other employers to try to jail former employees for trade secret theft.
Going after Cybercrooks
According to BloombergBusiness, Gao is one of five people to be charged by Vance for crimes relating to intellectual property theft. Vance has made cybercrime a priority, according to the New York Times.
The day before Gao’s plea, Jason Vuu, 24, of San Jose, California was sentenced to five years’ probation for stealing computer source code and other information from his employer Flow Traders, a trading house based in Amsterdam.
Previously, Sergey Aleynikov, a programmer for Goldman Sachs, served a year in federal prison based on federal trade the secret theft charges. After his federal conviction was overturned, he was charged with state-law trade secret theft crimes. He is scheduled to go to trial again in April.
Aleynikov was one of the real-life characters at the center of Michael Lewis’s bestseller Flash Boys.
If you have questions about protecting your trade secrets, please contact our office at 626-796-4000 or toll-free at 855-UR-IDEAS (855-874-3327) for a free initial consultation with one of our intellectual property attorneys. Please also visit our website for more information about us.
Photo Attribution: “Longleat Hedge Maze (detail)” licensed under CC BY-SA 3.0 via Wikimedia Commons.