The investing world took a controversial twist on Friday when one of the industry’s biggest hedge fund firms was informed that a rival is suing it in a case of theft of trade secrets.
Millennium Management Accused of Stealing a Trading Strategy
It seems likely to lead to a bitter court dispute.
Jane Street Group has accused Millennium Management of using its in-house trading strategy. The roots of this dispute date back to earlier this year, when traders Daniel Spottiswood and Douglas Schadewald moved from Jane Street to Millennium. Both were heavily involved in creating the proprietary strategy created by Jane Street to allow them to benefit from inefficient markets.
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However, staff at Jane Street noticed when Schadewald left the company that profits from the strategy almost immediately fell by over 50%. They seem to believe their suspicions were confirmed when they saw that a new entity “started placing orders mirroring the trading strategy”, which led them to believe their former employees, now at Millennium, were using the same strategy.
They say that both former employees have signed confidentiality agreements but that Millennium awarded Schadewald a compensation package described as lucrative and above the going rate for the market.
Jane Street has now filed a complaint at a federal court in New York. The firm seeks compensatory and punitive damages, claiming its trade secrets have been misappropriated, causing the investment company severe and irreparable harm.
Millennium is around twice the size of Jane Street Capital in terms of the number of employees and manages more than $63bn in assets.
