BTIG Trade Secret Suit Against StoneX Group Alleges More Than $1 Billion in Unjust Enrichment

On November 13, global investment banking firm BTIG filed a lawsuit  in California state court against rival company StoneX Group, alleging trade secret and breach of contract claims related to a StoneX’s recruitment of several key BTIG employees in order to gain access to valuable proprietary software code developed at BTIG. BTIG’s suit seeks disgorged profits of $200 million as well as remuneration for StoneX’s unjust enrichment, which BTIG estimates could reach over $1 billion.

Several Disloyal BTIG Employees Disclose Confidential Info to StoneX

Although heavily redacted, BTIG’s complaint accuses StoneX of improperly competing by poaching several key employees involved in developing bespoke software applications for trading solutions. BTIG alleges that StoneX began implementing this campaign by the end of 2020, while StoneX’s equities business was suffering from declining revenues. BTIG contends that StoneX was able to access BTIG’s proprietary software code and business strategies by hiring a series of six former BTIG employees:

• Chris Amato, BTIG’s former Managing Director, Head of American Depositary Receipts (ADR) Conversion Trading, who developed an ADR trading application earning millions of dollars annually for BTIG.
• Debayan Bhaduri, BTIG’s former Managing Director, Global Portfolio and ETF Trading (GPT) Group, who helped BTIG develop proprietary trading applications for BTIG’s quantitative trading and GPT group.
• Evan Pfeuffer, BTIG’s former Managing Director, GPT Group, who like Bhaduri was key to the development of BTIG’s proprietary trading applications.
• John Leung, Anthony Centrella and Jyoti Bhangale, each former Directors of BTIG’s GPT Group, who each assisted both Bhaduri and Pfeuffer with the development of BTIG’s proprietary trading applications..

According to BTIG, many of these StoneX employees took steps to copy valuable sensitive information while they were still employed at BTIG. For example, BTIG alleges that Amato exfiltrated company schematics, pitchbooks, tear sheets and internal market analyses prior to resigning. In the two months before he resigned from BTIG, Bhaduri sent several emails between his BTIG and personal email accounts including confidential information on BTIG’s proprietary software and business strategies. Discovery of these communications led to a March 2021 affirmation by Bhaduri that BTIG’s confidential and proprietary information had not been disclosed to StoneX, forming the basis of BTIG’s causes of action for fraud and fraudulent concealment.

Extraordinary Concealment Measures Include Appending Encrypted Code to PDFs

A forensic review of Pfeuffer’s activities on BTIG’s servers uncovered extraordinary measures taken by that former employee to obtain confidential information. As BTIG’s complaint alleges:

“Pfeuffer took large swathes of code and other proprietary information and encrypted them using NSA-level encryption techniques, rendering the payload a meaningless string of gobbledygook to anyone without the encryption key. Pfeuffer then appended the encrypted code to pdf versions of generic documents that were downloaded from the internet; anyone looking at the files would see a generic PDF document that when opened presented itself as normal, but in fact had code and other information secretly appended inside.”

BTIG’s complaint includes text messages between Pfeuffer and a StoneX software engineer days after Pfeuffer’s resignation from BTIG that allegedly confirm Pfeuffer’s actions. These include communications from Pfeuffer indicating that “hidden encrypted payload appended to pdf” and [t]he eagle has landed, code extracted.” Although both StoneX and Pfeuffer have allegedly refused to provide BTIG with the encryption key necessary to view the full scope of the exfiltrated code, forensic review determined that StoneX’s operational software code contains verbatim excerpts of BTIG’s proprietary code.

StoneX and Pfeuffer’s efforts to misappropriate BTIG’s software code was revealed earlier this year by a whistleblower working at StoneX, who revealed that critical aspects of StoneX’s market-making applications system contained several references to both BTIG and BTIG’s Managing Director of Technology. StoneX’s alleged use of BTIG’s code has led to commercial success for the firm, as BTIG’s complaint notes that StoneX’s stock price has increased 60% since engaging in its misappropriation campaign.

IPWatchdog reached out to StoneX for comment but an emailed response said the company has none at this time.

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