A U.S. District Court in Manhattan has ruled that Citadel Securities’ lawsuit against crypto-trading startup Portofino, founded by two former employees, can largely proceed. The court’s decision, documented in a filing on October 30, allows Citadel’s allegations of trade secret theft to move forward while also addressing employment contract breaches involving several former employees.
The judge denied Portofino’s motion to dismiss Citadel’s case but similarly rejected Citadel’s claims that Portofino had violated the employment contracts of three Citadel employees it attempted to recruit. Citadel Securities contended that the recruitment of systematic options trader Taym Moustapha breached his contract, prompting the firm to increase compensation offers to retain employees amid Portofino’s advances.
While the court dismissed Citadel’s claims regarding Moustapha and two unidentified employees, it permitted the firm to amend its complaint, allowing 30 days to address the deficiencies highlighted by the judge. In contrast, another claim concerning a different employee was allowed to advance.
On October 31, the court granted Portofino’s request to dismiss a claim related to a seed investor. U.S. District Judge Gregory Woods stated that Citadel Securities failed to demonstrate that the French investor, Jean Canzoneri, could have reasonably anticipated that his investment in Portofino would have legal implications in New York. The judge noted that Canzoneri’s investment occurred before Portofino’s establishment and any allegations of trade secret theft.
Canzoneri argued for the dismissal of the case against him, asserting that Citadel could not implicate him in aiding the alleged theft of trade secrets merely by investing in Portofino. He emphasized that any investor aware of the founders’ previous employment would recognize the potential for trade secret disputes.
Citadel Securities initially filed its lawsuit in May 2023 against former employees Leonard Lancia and Alex Casimo, accusing them of misappropriating trade secrets to establish their crypto market-making firm, Portofino. In response, Portofino sought to dismiss the lawsuit, claiming it was a strategic move to intimidate the former employees and deter others from similar entrepreneurial endeavors. The startup has maintained its denial of any allegations regarding the theft of trade secrets, arguing that Citadel’s claims are too vague and encompass the general practices of high-frequency trading firms.
“All Citadel Securities alleges is that it has confidential ‘research,’ ‘trading strategies,’ ‘simulations,’ and ‘business plans and strategies.’ So what? These amorphous categories cover the entirety of any HFT business,” Portofino stated in a Bloomberg report.
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