[ by Melanie Gretchen ]

Former CME programmer Chunlai Yang had many secrets.  Over the course of their investigation, the firm and federal authorities discovered he was not only not keeping them to himself, but he was stealing them to set up a Chinese exchange.

Findings and Allegations. Yang, a 49-year-old Chinese national with U.S. citizenship, received a PhD in physics before joining CME Group Inc. in 2000.  At the futures exchange, he had access to the company's proprietary software for its global trading platform. Between late 2010 and June 2011, he used USB drives to transfer company files containing source code to his personal hard drives, the U.S. Attorney said in a statement.  According to a plea agreement released by the U.S. Attorney's Office for the Northern District of Illinois, Yang admitted to downloading more than 10,000 files of CME's computer source code used in electronic trading platforms, according to a plea agreement released by the U.S. Attorney's Office for the Northern District of Illinois.

CME reported Yang's conduct to federal authorities and in July 2011, Yang, then a senior engineer, was arrested and released on a $500,000 bond., the U.S. Attorney said.  Upon discovery, Yang admitted that he and two unnamed business partners had plans to form a business that would increase trading volume at the Zhangjiagang chemical electronic trading market and establish a leading exchange in China.

Sanctions. Yang pled guilty on Wednesday to two counts of trade secret theft, and faces a $250,000 fine for each count as well as a prison sentence of up to 10 years.   Sentencing is scheduled for February 20, 2013.

C-I Note: CME operates several prominent derivatives exchanges, including the Chicago Board of Trade and the Chicago Mercantile Exchange.  How much damage would Yang success have caused?

The case: USA v. Yang, U.S. District Court, Northern District of Illinois, No. 11-458.

For further details, go to [Reuters, 9/19/12].