An Illinois circuit court has granted a request by hedge fund Citadel for a temporary restraining order against an employee accused by the firm of sneaking highly sensitive information off its computer servers.  In its complaint, Citadel claims that Yihao Ben Pu, who worked in the firm’s well-known quantitative division, “misappropriated confidential information and trade secrets.”  Mr. Pu, who is to be fired Tuesday, is accused of lying repeatedly about his activities and destroying evidence.

The court order prohibits Mr. Pu from disclosing confidential information about Citadel and destroying relevant evidence to the case. 

Citadel also claims that Mr. Pu was speaking with a recruiter at a rival firm, Teza Technologies, started by a former Citadel employee.  Teza’s founder, Mikhail Malyshev, was previously sued by Citadel for breach of contract and ordered to pay $2.2 million for destroying information from his home computer.

A lawyer representing Teza said the firm had nothing to do with the securities breach and it was "not in the process of trying to hire him.  The lawyer added:  "We have stayed a million miles away from every Citadel employee who a recruiter has brought our way precisely because Citadel has vowed to try and destroy our company.”

Protecting a Hedge Fund Crown Jewel.   Citadel’s quant shop is one of the hedge fund’s crown jewels.  The firm has spent hundreds of millions of dollars building the infrastructure and technology for the division, which trades in stocks, futures and other investments.

Plaintiff, Mr. Pu, 23, ...  was hired at Citadel last year as a quantitative financial engineer.  According to the complaint, Citadel began investigating Mr. Pu last week after noticing an “unusually large amount of data and programs associated with his user profile.”  The firm found that Mr. Pu downloaded programs onto his computer to circumvent Citadel’s security provisions, which prevent users from transferring data on Citadel computers to outside devices, the complaint said.

When confronted the next day, Mr. Pu said he uploaded only music and other academic papers to his cellphone.  However, Citadel alleges that Mr. Pu downloaded other information, including information related to the trading business, to a hard drive and his phone.

Nevertheless, Citadel claims that Mr. Pu violated the order to preserve his home computer and storage devices by destroying evidence.  The case is:  Citadel vs. Yihao Ben Pu.

To access the complaint, go to:   Citadel Complaint, 8/30/11]     [DealBook, 8/30/11]