A highly-skilled computer science engineer, YIHAO PU, who a prosecutor said “meticulously planned and brazenly executed” stealing sensitive trade secrets from two former employers ― a trading firm in New Jersey and later Citadel, LLC, a Chicago-based financial firm ― was sentenced today to three years in federal prison. Later today, Pu’s colleague, SAHIL UPPAL, who worked with and aided Pu at both firms, was sentenced to three years’ probation for obstruction of justice.
Pu, 27, currently of Waltham, Mass., and also known as “Ben Pu,” was ordered to begin serving his sentence on May 1, and was placed on three years of court supervision following his release from custody. Uppal, 27, of Colts Neck, N.J., and also known as “Sonny Uppal,” was placed on three years’ probation. U.S. District Judge Charles Norgle, who imposed the sentences, also ordered Pu and Uppal each to pay restitution totaling $759,649 to Citadel to cover the cost of its investigation. Both defendants pleaded guilty last August in Federal Court in Chicago.
“Pu committed theft on a grand scale from not one, but two, employers. What Pu stole was a proven money-making system from Company A and valuable trade secrets from Citadel. He stole extremely valuable intellectual property consisting of HFT [high frequency trading] computer code and alpha outputs that generated millions of dollars each year, cost millions of dollars to build, and took teams of professionals years to develop and refine ― all of which generated millions of dollars in profits per year,” Assistant U.S. Attorney Patrick M. Otlewski argued in a sentencing memo.
According to their guilty pleas and court documents, Pu graduated from Cornell University and Uppal graduated from Carnegie Mellon University, and they worked together at Company A in Red Bank, N.J., in 2009 and 2010. By late 2009, they planned to develop trading strategies for themselves and not for the benefit of their employers. In March 2010, the day before Pu resigned from Company A, he accessed the firm’s secure internal computer servers and downloaded thousands of files containing Company A’s trade secrets and copied them onto a personal hard drive.
Pu began working at Citadel in May 2010 as a quantitative financial engineer and his responsibilities included working with analysts and researchers to develop and enhance Citadel’s high frequency trading strategies. As part of his duties, Pu was permitted to use his office computer to access a folder stored on Citadel?s servers that contained information and data related to predictions signals commonly referred to as “alphas,” which are the building blocks of Citadel’s automated electronic trading algorithms and strategies. The alphas use incoming market data and other information to predict the movement of investment instruments and relevant market activity.
Pu bypassed Citadel’s security measures and stole thousands of files that contained Citadels’ alpha outputs. Pu then used those alphas in his own high frequency trading strategy for his own personal investment account in an effort to replicate Citadel’s trading for his own benefit. When Uppal joined Pu at Citadel, they continued their scheme to benefit themselves during the summer of 2011. Uppal transferred to Pu three computer files containing Citadel trade secrets without Citadel’s authorization.
On Aug. 26, 2011, Citadel confronted Pu about suspicious activity on his work computer, and Pu returned home and began destroying evidence. With Uppal’s help, Pu took a half dozen hard drives to a friend’s apartment, and a few days later Pu instructed his friend to get rid of them. The friend discarded six of the hard drives in a sanitary canal in Wilmette, while keeping another one at his apartment. Uppal obstructed justice by helping Pu conceal evidence and Uppal lied when he too was confronted and questioned by Citadel.