Citadel lawyer seeks order against ex-execs
Citadel Investment Group LLC, the Chicago-based hedge fund manager, urged an Illinois judge to let two former executives know "the rules do apply to them" by temporarily barring them from building a competing firm.
"The entire financial community of the United States is watching," Citadel lawyer Brian Sieve told state court Judge Mary Rochford at the close of a weeklong hearing today in Chicago.
Former executives Mikhail Malyshev and Jace Kohlmeier and their startup firm, Teza Technologies LLC, were sued by Citadel in July. The two claim they didn't breach the noncompete contracts they signed at Citadel because they were merely setting up their business and weren't actively trading securities yet.
Citadel manages about $14 billion in assets, its senior managing director, James Yeh, testified during the hearing. The company has asked Rochford for an order barring Malyshev and Kohlmeier from organizing the firm and preventing it from conducting any business for the full nine-month duration of the noncompete agreements.
Sieve told Rochford that nine-month term should now begin with the date of her ruling. Malyshev and Kohlmeier resigned from Citadel in February.
Citadel CEO
Kenneth Griffin, Citadel's founder and chief executive officer, watched today's proceedings from the back row of the courtroom. Afterward, he declined to comment on the case.
Chris Gair, the lead defense lawyer, is scheduled to deliver his closing argument later today. Gair, a partner at Chicago's Jenner & Block LLP, declined to comment on Sieve's statements during a court recess.
Malyshev led Citadel's high frequency trading unit, generating more than $1 billion last year using computer programs to predict minute share-price changes, then execute split-second trades to profit from them. Kohlmeier worked under Malyshev at Citadel.
Citadel also has filed for arbitration against the men, seeking $300 million in damages from each for allegedly breaking their noncompete contracts. Those agreements provided for Malyshev to receive $30,000 a month and Kohlmeier $21,000 a month during the time in which they were barred from competing with their former firm.
Sieve, a partner in Chicago-based Kirkland & Ellis LLP, spoke for about 90 minutes today, during which time he reviewed the evidence, including testimony that at least three Teza employees had uploaded to the company's computers code that had been developed elsewhere.
"What we've got here is a veritable pirate ship of illegal activity," Sieve said.
The case is Citadel Investment Group LLC v. Teza Technologies LLC., 09CH22478, Chancery Division, Cook County Circuit Court (Chicago).