U.S. Attorneys in many jurisdictions are more willingly stepping into the fray between financial services firms and their former employees who have misappropriated trade secret information. In a recently reported case out of the Northern District of Illinois, two former employees of Citadel LLC, a Chicago based premier hedge fund in the high frequency trading space, pled guilty and received three-year sentences for their participation in a scheme to steal source code from Citadel and a prior employer in order to create their own trading strategy for their personal future use. This continues a trend begun in earnest in 2013 after the Department of Justice issued the Administration’s Strategy On Mitigating The Theft Of U.S. Trade Secrets. Since that time, federal criminal enforcement efforts in trade secret matters have been on the upswing in the financial services industry as well as other areas.

In this matter in Illinois, the former employees eventually admitted their guilt and were sentenced. While Yihao Pu admitted stealing the code from Citadel and his prior employer and received a sentence of three years in prison, Sahil Uppal admitted he provided some of the code to Pu in violation of his confidentiality agreement with Citadel and then assisted Pu in hiding his computer and stolen data, thus obstructing justice for which he received a three-year sentence and probation. The two were also ordered to make restitution of $759,000 to Citadel.

The moral of this story is that proprietary software code related to particular strategies used by you and your employer should never be taken or shared without the employer’s express consent. If already taken, it must be returned rather than removed and hidden from the employer or authorities. Employers in financial services and other industries appear more inclined to report such conduct to governmental enforcement agencies than in the past. While there is always a balance of judgment employers must make when involving Federal or State law enforcement authorities in their employment-related matters, there certainly appears to be an emerging trend for such authorities to actively investigate and thoroughly prosecute cases against employees who steal trade secrets.

The cases referred to above are U.S. v. Pu, 1:11cr-00699 and U.S. v. Uppal, 1:11cr-00699-2 in the United States District Court for the Northern District of Illinois.