Hedge Fund Tries to Block U.K. Quant Fraudster's Return to China

Updated on
  • Ke Xu convicted of stealing trading algorithms from Trenchant
  • Firm demands Xu stay until August to protect trading secrets

The Tower Bridge is reflected in the glass window of an office building in London.

Photographer: Simon Dawson/Bloomberg

A London hedge fund analyst convicted of stealing millions of pounds worth of secret algorithmic trading strategies shouldn’t be allowed to be deported from the U.K. in case he sells the data to rival firms in China, lawyers for Trenchant Ltd. said.

The U.K. ordered Ke Xu’s immediate deportation and has refused to delay his departure, leaving Trenchant open to "serious harm" when he returns home and is able to sell their trading secrets, the firm’s lawyers said when asking a London judge to review the government’s “unlawful” decision. 

"While the strategies are not tangible assets which may be sold by being handed over in a backstreet, they are capable of being traded by Mr. Xu," or sold to "unscrupulous" rival firms, Trenchant’s lawyers said in court documents prepared for Thursday’s hearing.

Trenchant develops the algorithmic investment strategies that associated companies run on computer platforms to make financial market investments.

Xu, a University of Cambridge math graduate who had worked at Goldman Sachs, was employed at Trenchant between 2012 and 2014. He undertook a "sustained and extensive attack" on the fund’s computer systems and reverse-engineered code for 55 investment strategies worth 31 million pounds ($41 million), lawyers said.

Arrest

He abruptly fled to Hong Kong in August 2014 to meet headhunters with the stolen data. Xu was arrested there and extradited to the U.K. He pleaded guilty to a series of charges and was sentenced to four years in jail in July 2015.

A Home Office spokesperson declined to comment on Xu’s individual case.

Trenchant doesn’t want Xu to leave the country until August 2018 when his conviction officially ends. Xu, who was jailed for another 18 months in January for refusing to return the codes, continues to deny he made copies of any of the strategies although it is likely he memorized them, lawyers said.

The shelf life of the stolen codes are thought to be around five years, the fund’s lawyers said.

The U.K. Home Office said the strategies only have economic value when they are being traded. The fund rejects that argument, saying “so long as a strategy is capable of being traded it has value."

"It has been proven that he had plans to profit from what he stole and went to great lengths to put it, and keep it, beyond the claimant’s reach," the fund said in documents.

Xu, who is currently being held in immigration detention, should be deported "to protect the U.K. population as a whole from the risk of further criminality" from him, the Home Office said in its decision to send him back to China.

"Mr. Xu is a white-collar criminal whose serious criminality was against his employers," Trenchant said. "The intellectual property which he stole and could exploit was exclusively that belonging to," Trenchant.

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