Jane Street gets millennium trade secrets countersuit tossed

The judge ruled last month that Jane Street had to share that filing with Schadewald and Spottiswood, rejecting its argument that it would give them a “roadmap” for further theft.

A federal judge threw out counterclaims against Jane Street Group by Millennium Management and two former traders whom Jane Street accused of stealing a valuable Indian options trading strategy.

In a ruling Thursday night, US District Judge Paul Engelmayer in Manhattan rejected Millennium’s argument that Jane Street’s April trade secrets lawsuit constituted unfair competition because it was brought in “bad faith,” with the sole goal of harming a rival’s business and reputation.

It was the second favorable ruling for Jane Street in recent days, following a series of adverse ones earlier in the case. A week ago, Engelmayer threw out an “unclean hands” defense asserting that losses suffered by Jane Street were due to its own “highly unusual trading activity” rather than alleged strategy theft.

The judge on Thursday said the unfair competition counterclaim failed because Jane Street wasn’t trying to improperly benefit from any labor or investment by Millennium.

Millennium and Jane Street both declined to comment on the ruling.

Judge’s Skepticism
In its lawsuit, Jane Street accused former traders Douglas Schadewald and Daniel Spottiswood of taking a highly confidential and “immensely valuable” trading strategy to new jobs at Izzy Englander’s hedge fund group in February. Though all details of the strategy were initially redacted in court filings, it was inadvertently revealed at an April 19 hearing that it involved options trading in India.

At that same hearing, Engelmayer dealt a blow to Jane Street by denying its request for a restraining order barring Millennium and the two traders from using the strategy. Millennium, Schadewald and Spottiswood pointed to that decision in their May countersuits.

Schadewald, Spottiswood and Millennium deny stealing any trade secrets. The two traders claimed credit for building the Indian options business at Jane Street but said it was based on their experience and expertise rather than any secret “algorithms or automated signals.” Millennium noted that it has been trading in India for years, winning regulatory approval in 2016 to hold Indian securities as a foreign entity.

Engelmayer has previously expressed skepticism about Jane Street’s suit, saying at a May 16 hearing that he didn’t think the proprietary trading firm had identified an actionable trade secret. He ordered Jane Street to provide a more detailed filing on its strategy.

Closed Conference
The judge ruled last month that Jane Street had to share that filing with Schadewald and Spottiswood, rejecting its argument that it would give them a “roadmap” for further theft.

But Engelmayer has more recently found legal overreach on the part of Millennium, Schadewald and Spottiswood. In rejecting some of their defenses last week, the judge said they failed to adequately allege that Jane Street engaged in “unconscionable” conduct directly related to the case.

On Thursday, in addition to tossing the unfair competition claim, Engelmayer dismissed counterclaims seeking legal fees from Jane Street. He said the claims were improperly brought under the trade secrets statute but that Millennium, Schadewald and Spottiswood could seek fees if they ultimately prevail in the case.

The two sides are scheduled to appear before Engelmayer later on Friday for a conference that was closed to the public by the judge because it’s expected “to address confidential matters related to Jane Street’s alleged trade secret and other proprietary trading strategies.”

The case is Jane Street Group LLC v. Millennium Management LLC, 24-cv-02783, US District Court, Southern District of New York (Manhattan).