U.S. Programmer Accused of Stealing $1 Billion Trading Algorithm Faces Jail Time
U.S. Programmer Accused of Stealing $1 Billion Trading Algorithm Faces Jail Time
A U.S. programmer has been charged with stealing a trading algorithm valued at over $1 billion from his former employer, Headlands Technologies, according to Bloomberg.
Richard Ho, a Cambridge graduate and former employee of the Chicago-based quantitative trading firm, allegedly conspired with one of Headlands’ main competitors, Tower Research Capital, to use the stolen code for high-frequency trading operations.
Richard Ho, a Cambridge graduate and former employee of the Chicago-based quantitative trading firm, allegedly conspired with one of Headlands’ main competitors, Tower Research Capital, to use the stolen code for high-frequency trading operations.
U.S. Programmer Accused of Stealing $1 Billion Trading Algorithm Faces Jail Time
The criminal charges stem from a lawsuit filed by Headlands in 2023, accusing Ho of theft and breach of intellectual property.
Prosecutors in Manhattan were reportedly drawn to the case due to the staggering amount of money involved—billions of dollars in potential profits—and the growing trend of legal disputes over algorithmic trading on Wall Street.
Former federal prosecutor and cybersecurity expert Alok Chakravarty noted that these cases could set clear criminal boundaries for companies operating in the algorithmic trading space.
According to court documents, Ho joined Headlands in July 2019 as a researcher and developer, earning an annual compensation package exceeding $1 million.
While employed there, he allegedly founded his own quantitative trading firm, One R Squared, in early 2021.
Prosecutors claim that Ho stole proprietary “atoms” and “alphas”—the building blocks of Headlands’ predictive models—and incorporated them into his own trading algorithms.
Prosecutors in Manhattan were reportedly drawn to the case due to the staggering amount of money involved—billions of dollars in potential profits—and the growing trend of legal disputes over algorithmic trading on Wall Street.
Former federal prosecutor and cybersecurity expert Alok Chakravarty noted that these cases could set clear criminal boundaries for companies operating in the algorithmic trading space.
According to court documents, Ho joined Headlands in July 2019 as a researcher and developer, earning an annual compensation package exceeding $1 million.
While employed there, he allegedly founded his own quantitative trading firm, One R Squared, in early 2021.
Prosecutors claim that Ho stole proprietary “atoms” and “alphas”—the building blocks of Headlands’ predictive models—and incorporated them into his own trading algorithms.
Headlands describes “alphas” as real-time models that predict price movements based on data, while “atoms” are specific functions used to construct those models.
Ho played a key role in Headlands’ “China initiative,” which expanded its algorithmic trading capabilities to Chinese markets.
However, instead of using this knowledge solely for the company’s benefit, prosecutors allege that Ho exploited it for personal gain.
Authorities claim that Ho directly copied Headlands’ code, made minor cosmetic changes, and integrated it into One R Squared’s systems.
After leaving Headlands in August 2021, Ho’s firm began trading on Chinese markets in early 2022 and later expanded to U.S. markets. In exchange for developing automated trading strategies, Ho’s company reportedly received $15 million from Tower Research Capital. Headlands argues that Tower was aware—or should have been aware—that the code was stolen.
Ho played a key role in Headlands’ “China initiative,” which expanded its algorithmic trading capabilities to Chinese markets.
However, instead of using this knowledge solely for the company’s benefit, prosecutors allege that Ho exploited it for personal gain.
Authorities claim that Ho directly copied Headlands’ code, made minor cosmetic changes, and integrated it into One R Squared’s systems.
After leaving Headlands in August 2021, Ho’s firm began trading on Chinese markets in early 2022 and later expanded to U.S. markets. In exchange for developing automated trading strategies, Ho’s company reportedly received $15 million from Tower Research Capital. Headlands argues that Tower was aware—or should have been aware—that the code was stolen.
Ho’s defense team plans to argue that the “atoms” and “alphas” do not qualify as trade secrets.
“Algorithmic trading code is not static like the secret formula for Coca-Cola; rather, it’s more like an open can of Coke—it quickly goes flat,” wrote attorney David Maister in court filings.
Experts explain that well-designed algorithms, paired with robust infrastructure, can become a “gold mine” capable of generating automatic profits regardless of market conditions.
For example, a model might identify patterns such as futures contracts for platinum and palladium typically dropping at 2:30 PM and rebounding by 2:32 PM, instructing the system to sell at 2:29 PM and repurchase at 2:31 PM.
As Ernest Chan, founder of QTS Capital Management, noted, a properly constructed algorithm is essentially a cash-generating machine.
“Algorithmic trading code is not static like the secret formula for Coca-Cola; rather, it’s more like an open can of Coke—it quickly goes flat,” wrote attorney David Maister in court filings.
Experts explain that well-designed algorithms, paired with robust infrastructure, can become a “gold mine” capable of generating automatic profits regardless of market conditions.
For example, a model might identify patterns such as futures contracts for platinum and palladium typically dropping at 2:30 PM and rebounding by 2:32 PM, instructing the system to sell at 2:29 PM and repurchase at 2:31 PM.
As Ernest Chan, founder of QTS Capital Management, noted, a properly constructed algorithm is essentially a cash-generating machine.
Until now, disputes over trading algorithms have largely been resolved through civil litigation or private arbitration.
However, this case marks a significant shift toward criminal prosecution, potentially setting a precedent for future cases involving intellectual property theft in the financial industry.
However, this case marks a significant shift toward criminal prosecution, potentially setting a precedent for future cases involving intellectual property theft in the financial industry.
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