FBI Arrests Former Susquehanna Trader For Stealing HFT Code


Almost eight years after Sergey Aleynikov made HFT a watercooler topic after the former Goldman engineer was arrested (and incarcerated, then released, then charged again, then found innocent, and finally found guilty yet again) for allegedly stealing Goldman’s proprietary HFT code, a trading software developer was charged last Thursday by the acting U.S. Attorney in Manhattan, Joon Kim, for attempting to steal quantitative trading code from Susquehanna International Group, a relatively secretive financial firm based in the Philadelphia area that specializes in making markets for options.

A 44-year-old native Russian, Dmitry Sazonov worked for Susquehanna since 2004 as a software engineer and, by implication, trader. He was arrested in the lobby of Susquehanna’s New York offices last Wednesday by FBI agents, Forbes first reported.

According to the complaint, Sazonov “attempted to steal valuable proprietary computer code that took his employer years to develop.”  Sazonov was accused ot taking elaborate steps to conceal his attempted theft, including camouflaging pieces of source code within harmless-looking draft emails on his work computer.

Specifically, the code which Sazonov was accused of stealing was linked to an updated trading platform Susquehanna has been developing for years to generate exchange and market orders. Sazonov started his effort to steal the proprietary trading code in February, the complaint says, after learning his supervisor had resigned.

Prosecutors claim that Sazonov, fearing he would be fired, downloaded the source code to his company computer and deployed a computer program that may have used steganography to break up data and hide data within other files, including personal tax and immigration documents. Sazonov attached zip files containing the quant trading code to two saved emails addressed to a personal account, but he was fired and immediately escorted out of Susquehanna’s New York offices in February before he had a chance to send the emails.

Then, according to the complaint, on multiple occasions following his termination Sazonov contacted individuals employed by Susqyehanna seeking the return of computer files on his desktop computer, which he claimed were personal documents.  Then, last Wednesday, April 12, 2017, the feds say Sazonov showed up in the lobby of Susquehanna’s New York offices thinking he was going to have them returned. There, an FBI agent pretending to be a Susquehanna employee handed Sazonov a disk and he was arrested.

As an interesting aside in the complaint we read the following:

For at least approximately five years, Firm 1 has been in the process of developing an updated and improved version of the Trading Platform (the “Updated Trading Platform”).  Firm?1 has, to date, invested more than approximately $5 million in the development of the Updated Trading Platform.  The Updated Trading Platform is expected by representatives of Firm-1 to continue to enhance the position of Firm-1 in the markets in which it participates and to contribute substantially to Firm-1’s market share and profits.  Accordingly, Firm-1 has put in place measures designed to protect the computer source code (the “Source Code”) underlying the Updated Trading Platform.

According to Sazonov’s LinkedIn page he was educated in Russia and has been working at Susquehanna since 2004, developing “strong experience with trading application development.” One wonders how long before he is linked to the Trump campaign too….

The complaint filed by federal prosecutors says Sazonov has worked at the firm that fired him since 2004 and that the firm is headquartered in Pennsylvania with offices in New York. The feds also say the trading platform Sazonov worked on trades $300 million in options daily. Susquehanna is best known on the Street for its options trading.

Sazonov, of Rockland County, New York, was charged with one count of attempted theft of trade secrets, which carries a maximum sentence of 10 years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense.

Sazonov’s arrest for “stealing” source quant code is just the latest in a long series of enforcement crackdowns on engineers and traders accused of misappropriating proprietary trading data. According to Forbes, last week federal prosecutors in Manhattan also charged Jim Zhang with stealing computer code related to algorithmic trading models at an unnamed New York-based financial firm.

In recent years Manhattan District Attorney Cyrus Vance has taken the lead in the area after the controversial saga of Sergey Aleynikov. The former Goldman Sachs quantitative trading researcher was initially prosecuted by federal prosecutors starting in 2009 for allegedly stealing secrets. He was convicted by a federal jury but a federal appeals court overturned the decision. Aleynikov was later prosecuted again by District Attorney Vance, found guilty by a jury, acquitted by a judge, and then essentially found guilty again by an appeals court earlier this year.

Full complaint here.