Accused Soc Gen High Frequency Thief Was Headed To Tower Research

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Editor's Note: The following is a guest post by John Carney.

The former Societe Generale trader arrested yesterday on charges of stealing Soc Gen’s computer code for high-frequency trading was set to begin work this week at Tower Research Capital, a New York based quantitative hedge fund, according to a source.

Samarth Agrawal was charged yesterday with one count of theft of trade secrets, according to Bloomberg. Federal prosecutors said he made copies of the code behind Soc Gen’s proprietary trading last summer.

Agrawal resigned in November, just seven months after he was promoted to be a trader at Soc Gen. He had worked as a quantitative analyst for the bank’s high frequency trading group since 2007, according to reports.

A source familiar with the matter has exclusively told DealBreaker that Agrawal was scheduled to start at Tower Research Capital this past Monday.

“I guess he found a home for his stolen code,” the source said.

Tower Research Capital was founded by two former Credit Suisse traders in 1998, according to a Bloomberg profile from 2007. The firm uses complex computer algorithms to looks for small discrepancies from statistically predictable patters in financial markets. The computers then make bets that the discrepancy will be resolved in favor the typical pattern. Humanity is superfluous to the process, once the code is written by engineers. In 2000, the firm decided that it could not find brokers who could execute its trades fast enough—so it formed its own high frequency trading company, Lime Brokerage.

Around the same time Lime Brokerage was formed, the company also built LimeWire—a file sharing system that the recording industry claimed in a lawsuit filed in 2006 is a tool for music piracy. So the accused code thief was going to work for people who built a file sharing system accused of enabling theft of intellectual property.

No one alleges that Tower knew Agarwal had allegedly stolen code from Soc Gen. This is the second case brought by federal prosecutors involving the theft of quantitative code from an investment bank. A former Goldman quant was charged with stealing code a few months back.

Tower Research would not comment for this story. Steven Statsinger, Agrawal’s attorney, did not immediately return a call seeking comment.

Update: A spokeswoman for Tower responds:

On Monday, April 19, Tower Research Capital LLC learned that Mr. Samarth Agrawal was taken into federal custody and charged by the U.S. with stealing computer codes from Societe Generale. Tower had previously extended an offer of employment to Mr. Agrawal, but he never commenced his employment with us. We are shocked by the news of Mr. Agrawal’s arrest and are cooperating with the authorities on the matter.

Tower believes strongly in the proprietary rights of third parties, including our competitors, and we take steps to assure that our employees abide by those rights. In hiring, Tower chooses individuals based on their experience, knowledge and background, with no intent of accessing the proprietary knowledge they may have acquired from previous employers.

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