Former Two Sigma Investments analyst Kang Gao was accused of stealing trade secrets earlier this year and is facing a potential four-year prison sentence, Bloomberg's reported.
New York State Supreme Court Justice Jeffrey Oing told Bloomberg that this is the first lawsuit he's seen to rise to a level or criminal indictment. This is also the first time Two Sigma has had an employee jailed for stealing the hedge fund's secrets.
Leading the charge is District Attorney Cyrus Vance Jr. Vance has been pushing for stricter laws to protect Wall Street firms from theft of coding software and trade models.
Disputes over cyber information have grown more prominent as finance has become computerized. The challenge for Vance is changing existing laws to include protection of technology secrets, and proving these thefts are harmful to markets and the general public.
Vance is also pursing former Goldman Sachs programmer Sergey Aleynikov, and former Flow Trader employees Jason Vuu and Glen Cressman. Aleynikov was sentenced in 2010 to eight years in prison, but his verdict was overturned one year in. Since then, the protection of products and services has been added to the U.S. Economic Espionage Act.
Gao's attorney Marc Agnifilo told Bloomberg that leaving these cases to prosecutors is actually easier than hiring a private law firm.
"What you're starting to see now is these companies, rather than paying money for a private law firm, go to the district attorney's office and have the district attorney's office do their bidding. The district attorney's office is certainly better at it -- they hold people in jail."
Oing said he believes this case will establish a precedent for sending more analysts and programmers to jail as a consequence of stealing tech secrets.
"That, perhaps, may now be opening the door for all employers to think 'You know what, we are going to put these guys in jail now,'" he told Bloomberg. "That is going to be really something."