NEW YORK (Reuters) – A former Societe Generale trader, who surprisingly admitted at trial that it was wrong for him to have copied the French bank's speed-trading computer code, was convicted of trade secrets theft on Friday.
A New York jury took two hours to return the verdict against Samarth Agrawal, 27, a citizen of India. The panel heard testimony during the two-week trial that he planned to use the code to help build a high-frequency trading system at a new job with Tower Research Capital LLC hedge fund in April.
Agrawal, who looked solemn when the verdict was announced in U.S. District Court in Manhattan, faces up to five years in prison when he is sentenced on February 24. He is also expected to be deported from the United States.
High-frequency trading, or high-speed automated trading, has become an increasingly important and competitive business, generating millions in profits for banks and brokerages. The computer codes that help firms trade shares in milliseconds are closely guarded secrets.
Similar issues will be highlighted at another criminal trial in the same court set to start on November 29 involving a former employee of Wall Street's most influential bank, Goldman Sachs Group Inc.
In that case, computer programer Sergey Aleynikov was charged with trade secrets theft for purportedly taking Goldman code to his new employer -- Teza Technologies LLC, a high-frequency trading start-up in Chicago -- last year.
U.S. prosecutors had asked Judge Denise Cote to close parts of the trial to protect Goldman's trade secrets, but on Friday she indicated it was premature to rule because she would need more specificity and context.
"We'll just march through these issues, one by one, as they arise," Cote said at a pretrial hearing. The trial is expected to last three weeks.
High-frequency trading has also come under the scrutiny of securities regulators after the May 6 "flash crash" roiled stock markets.
During Agrawal's trial, his lawyer, Ivan Fisher, tried to appeal to juror sympathies by describing him as a highly educated, ambitious young man from India who felt isolated at the French bank. Employees from the Tower unit he wanted to join were from India.
Agrawal had pleaded not guilty, but his trial took a turn on Wednesday when he said under questioning from his own lawyer that he knew copying and printing SocGen's proprietary code was wrong. Judge Jed Rakoff described the lawyer's strategy as a "sympathy defense.
Fisher declined to comment on the verdict.
FBI agent William Slattery testified that he found printouts of algorithmic code and handwritten notes in the bedroom of Agrawal's apartment in Jersey City, New Jersey, in April. Agrawal worked at SocGen's New York office from March 2007 to November 2009. He was arrested on April 19 -- the day he was to start his new job at Tower.
A SocGen spokesman, Jim Galvin, said in a statement: "We are very satisfied with today's guilty verdict. We brought this matter to the attention of the criminal authorities because Societe Generale is determined to protect its valuable intellectual property to the fullest extent of the law."
Tower said at the time of Agrawal's arrest that it cooperated with authorities.
"The conduct described in this trial was contrary to Tower's policies and is not tolerated by the firm," Tower's general counsel, Sandy Choi, said in a statement on Friday. "As a result, upon learning of the conduct, Tower terminated three longtime employees who had interacted with Mr. Agrawal."
The cases are USA v Agrawal, U.S. District Court for the Southern District of New York, No. 10-417 and USA v Aleynikov No.10-96 in the same court.
(Reporting by Grant McCool; Editing by Lisa Von Ahn, Bernard Orr, Gary Hill)
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