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Citadel sues ex-staff for contract breach; raises code-theft spectre

10 July 2009  |  6181 views  |  0 STOP

Citadel Investment Group is suing three former employees who set up Teza Technologies, the firm that became embroiled in the Goldman Sachs code theft case this week, for violating a non-compete agreement.

Citadel has filed a complaint in Illinois state court, suing Mikhail Malyshev, former head of its high-frequency trading business, and two of his colleagues at the firm, Jace Kohlmeier and Matthew Hinerfeld.

Citadel says that by starting Teza, the three violated a nine month non-compete clause. According to court papers, Malyshev was being paid $30,000 a month to sit out the period to November.

The hedge fund is seeking a court order to stop the men conducting any business through Teza that competes with Citadel until the non-compete agreements expire.

Citadel says it only learned about the existence of Malyshev's new firm this week after it emerged that Sergey Aleynikov, the man accused of stealing proprietary trading code from former employer Goldman Sachs, had been hired by Teza.

The complaint says: "Teza's decision to hire Aleynikov, an accused software thief, creates a substantial risk that they have stolen, or may be planning to steal, Citadel's proprietary code."

Teza says the three men have abided by the non-compete agreement and claims the Citadel suite is "frivolous" and appears to be designed to "harass" executives. The company insists it had no knowledge of the alleged theft of Goldman software until Aleynikov's arrest and has since been working with the FBI.

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