Citadel Securities’ Trade Secrets Suit Proceeds Against Portofino

(Bloomberg) — Citadel Securities’ lawsuit accusing Portofino Technologies AG of trade-secrets thefts can largely move forward against the high-frequency crypto-trading startup but not one of its seed investors.

US District Judge Gregory Woods in Manhattan ruled Thursday that he lacked jurisdiction over the investor, Jean Canzoneri, a French citizen living in Italy. But the judge on Wednesday rejected Portofino’s similar argument that the dispute was “fundamentally European,” saying allegations that it poached a New York-based Citadel Securities employee were sufficient to allow the case to move forward.

Citadel Securities claims two former London-based employees, Leonard Lancia and Alex Casimo, launched Portofino in Switzerland with stolen trade secrets. The market-making firm sued Canzoneri for allegedly aiding and abetting trade-secrets theft by providing funding to Portofino.

In a statement, a Citadel Securities spokesperson said the firm was pleased with the ruling allowing the case to move forward against Portofino. “We look forward to pursuing our case and holding them accountable in court,” the spokesperson said.

A spokesperson for Portofino said the firm didn’t take any trade secrets and suggested Citadel Securities’ suit was in response to the startup’s success.

‘All Things Crypto’

In a Wednesday conference in the case, Woods said Portofino’s recruitment of Vincent Prieur, an “aggregator of all things crypto” who worked on high-speed products for Citadel Securities in New York, meant the case had sufficient impact in the US city to confer jurisdiction. 

The judge noted that Citadel Securities alleged Prieur was working on a similar product at Portofino and had contacted a senior Citadel Securities executive to learn more about its crypto efforts before moving to Portofino in 2022, well before his non-competition agreement expired. That raised a reasonable inference that he contributed to Portofino’s alleged trade-secrets theft, Woods said.  

“With these trade secrets, the corporate defendants were able to recruit employees, attract clients and acquire investors in New York, where Citadel competes,” the judge said. A lawyer for Prieur didn’t immediately respond to a request for comment.

On the other hand, Woods said Citadel Securities hadn’t shown that the alleged actions of Canzoneri had any consequences in New York justifying jurisdiction there. The judge noted that Canzoneri’s alleged investment pre-dated Portofino’s April 2021 founding and any alleged trade-secrets theft.

Canzoneri had also argued the case should be dismissed against him because Citadel Securities hadn’t adequately alleged that he “aided and abetted” any trade-secrets theft. He said the market maker was essentially claiming “that anyone who invests in a startup with knowledge of its founders’ past employment knows that they are stealing trade secrets from their old jobs.”

A lawyer for Canzoneri declined to comment. Citadel Securities also sued ten “John Does” it said were other early-stage investors in Portofino whom it had been unable to identify.

Woods also threw out on jurisdictional grounds claims against Portofino relating to its hiring or attempts to hire three UK Citadel Securities employees. 

In its suit, Citadel Securities said Portofino’s recruitment of Taym Moustapha, a systematic options trader, was a violation of his employment agreement. It also pointed to an unidentified employee to whom it was forced to pay “substantially increased compensation” to counter a Portofino offer.

Woods dismissed Citadel Securities’ claims regarding Moustapha, the unidentified employee and one other, but gave the firm leave to refile its allegations.

‘Brazen Scheme’

Citadel Securities filed suit last year, accusing Portofino of engaging in a “brazen scheme” to steal trade secrets and raid the ranks of the firm’s employees. Lancia and Casimo allegedly began fundraising and building Portofino before they left Citadel Securities, where Lancia was the head of Europe systematic market making for derivatives and Casimo was with the firm’s business-management team in Europe.

In a motion to dismiss filed last year, Portofino labeled Citadel Securities’ suit an attempt to intimidate “two employees who dared strike out on their own and to send a message to other Citadel Securities employees thinking of doing the same.”

Portofino said Citadel Securities had “not come within shouting distance of alleging” trade-secrets theft. 

“All Citadel Securities alleges is that it has confidential ‘research,’ ‘trading strategies,’ ‘simulations,’ and ‘business plans and strategies.’ So what? These amorphous categories cover the entirety of any HFT business,” Portofino said.

–With assistance from Katherine Doherty.

(Updates with detail from court hearing)

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