UPDATE:Teza: Citadel Trying To Send Message To Those Who Leave
2009年10月10日 - 6:37AM
Dow Jones News
Lawyers for start-up high-frequency trading firm Teza
Technologies LLC on Friday charged that a legal case being brought
by Citadel Investment Group LLC is not about enforcing noncompete
agreements, but aimed at sending a message to those who dare to
leave the giant hedge-fund firm.
Chicago-based Citadel has alleged that former employees Mikhail
"Misha" Malyshev and Jace Kohlmeier violated their noncompete
agreements after leaving in February and subsequently founding
Teza, but Teza attorney Christopher Gair said on Friday there is no
evidence that the start-up firm can compete yet.
"This is about a $15 billion hedge fund that brought an army of
lawyers to bear on two guys who chose to leave Citadel," said Gair,
in closing arguments Friday before a Chicago court.
An injunction sought by Citadel to shut down Teza's operations
for nine months would be a "mortal blow" to the company and its
employees, according to Gair.
Teza's defense hinges on the argument that its founders and
their employees were developing technological infrastructure to
support high-frequency trading, but the firm was not yet developing
trading strategies, or "alphas" - a key component of the business
that would let Teza trade and put the nascent firm in competition
with Citadel, violating the nine-month noncompete agreements
binding Malyshev and Kohlmeier.
"We have not begun work on alphas, and alphas are the core of
the business," Gair said. "Infrastructure is not the core of this
business."
Malyshev and Kohlmeier were key figures in Citadel's
high-frequency trading group, and helped expand it into a unit that
earned $1 billion in 2008, even as the company's flagship hedge
funds lost 55% amid the global financial turmoil.
High-frequency trading, driven by computer programs, seeks
profits through rapid-fire transactions across multiple exchanges
and trading venues. It has helped banks and proprietary trading
firms make healthy returns as the broader market struggles.
Teza didn't catch Citadel's attention until the early July
arrest of Sergey Aleynikov, a former computer programmer with
Goldman Sachs Group Inc. (GS) who has been charged with stealing
code from the Wall Street bank. Aleynikov had left Goldman to join
Teza, which subsequently fired him.
Citadel lawyer Brian Sieve earlier Friday called on Judge Mary
Rochford to temporarily shut down Teza, which he termed a "pirate
ship of illegal activity," on grounds that Malyshev and Kohlmeier
sought to poach Citadel employees and develop competing
high-frequency trading strategies, while keeping their activities
secret from their former employer.
Sieve also alleged Friday that Malyshev committed perjury, with
the Teza founder first saying in an affidavit that he did not
delete computer files covered by a July document preservation
order, before admitting in later testimony that he did after
panicking about pornography contained in his computer.
Gair acknowledged that Malyshev didn't tell the truth on that
matter, but called it a "distraction from real issues of the
case."
Closing arguments are expected to conclude Friday.
In separate arbitration proceedings, Citadel is pursuing $300
million worth of damages from each of the defendants, along with
$100 million from a former Citadel lawyer now serving as Teza's
general counsel.
-By Jacob Bunge, Dow Jones Newswires; 312-750-4117