A former employee of hedge fund Citadel was arrested and charged by federal authorities in Chicago with stealing trade secrets from the investing powerhouse.  Citadel, founded by Ken Griffin, has one of the most sophisticated computer systems in the investment world, and this is not the first time Citadel has come down hard on those whom the firm suspects of compromising its highly secret system.  A civil court in Chicago previously awarded Citadel $2.2mn from a former employee it accused of breach of contract and illegally destroying evidence. The program, housed in Citadel's computer trading division, attempts to read the markets through complex algorithms and then execute lightning-fast trades with no human intervention. Charges Against Ex-Employee. Six weeks ago, an Illinois civil court granted a restraining order against the employee, Yihao Ben Pu, who was hired last year as a quantitative engineer.  Pu, 24, is alleged to have illegally uploaded sensitive information about Citadel’s computer-driven trading strategies to personal devices in August before attempting to destroy the evidence.   He was confronted by Citadel on 8/26, a day after employees at the hedge fund noticed an unusual amount of data associated with his computer profile.  But when asked to explain himself, Mr. Pu said he was only uploading personal information from his Citadel computer, and not the firm’s proprietary trading information, the complaint says.

The firm asked him to retain all of his files. But that same evening Mr. Pu began attempting to destroy evidence.  The next day, 8/27, Mr. Pu cleaned the hard drives of information at the house of an unnamed friend.  The friend later dumped all the computer equipment into a nearby canal.  The friend subsequently helped police find all the equipment, including 6 hard drives.

Pu was to remain in custody until a detention hearing in Federal District Court in Chicago. If convicted, Pu could face up to 10 years in prison for theft of trade secrets. For further details, go to:   [Dealbook, 10/13/11]