Thursday, June 21, 2007, 6/21/2007 08:09:00 AM

$20 Million Settlement in Hedge Fund Trade Secrets Case

From MarketWatch, a story concerning a settlement -- for $20 million -- paid by hedge fund Millennium Partners to Renaissance Technologies Corp. The case arose out of Millennium's hiring of two former Renaissance employees, Pavel Volfbeyn and Alexander Belopolsky. In a December 2003 lawsuit, Renaissance claimed that the two planned to use information about the firm's business as part of a new trading system they developed at Millennium.

According to the story, "Renaissance employs a small army of PhDs who develop computer models to track down price anomalies and generate trading ideas, following a strategy known as statistical arbitrage. If lots of other traders got hold of its models and copied its trades, those arbitrage opportunities could dwindle."

Under the terms of the settlement between the two hedge fund firms, Millennium denied any misconduct or liability. Millennium also agreed to fire Volfbeyn and Belopolsky and Renaissance's case against them will continue.

MarketWatch reports that "Volfbeyn said that the trade secrets Renaissance has been working to protect 'are nothing more than general ideas that are well known to people familiar with statistical arbitrage and quantitative finance.'"

We've heard that defense before.

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