Former Headlands Quant Trader Charged with Stealing Over $1 Billion in Source Code to Start Own Trading Firm and Collaborate with Competitors
U.S. prosecutors have charged former Headlands Technologies quant trader Cheuk Fung Richard Ho with stealing the company's core source code to start his own trading firm and collaborate with competitors.
Ho worked at Headlands from 2019 to 2021 and was arrested on January 8, 2025, in Los Angeles, facing charges of theft of trade secrets and attempted theft, which could result in up to 10 years in prison; he has pleaded not guilty, and the case is being handled by the Complex Frauds and Cybercrime Unit of the U.S. Attorney's Office for the Southern District of New York. Headlands has also filed a civil lawsuit since 2023.
Prosecutors allege that Ho misappropriated the "Atoms" and "Alphas" components, developed at a cost of over $1 billion by Headlands, during his employment. He secretly established One R Squared, retaining the original structure and functionality of some code after reorganization; One R Squared later collaborated with Tower Research Capital, with Headlands alleging in its civil suit that Tower injected approximately $15 million into it, believing that Tower "knew or should have known" that the strategies originated from its intellectual property.
According to the charges, One R Squared began trading in the Chinese market in the spring of 2022 and later moved to the CME and ICE; Ho is accused of misleading his former employer about his plans after leaving and instructing employees to delete relevant evidence.
The judge has denied Ho's motion to dismiss the charges and has ordered prosecutors to provide more information about the allegedly stolen source code; the civil and criminal cases are proceeding concurrently, with Tower not being accused of wrongdoing in the criminal case but denying the source of the code in related litigation and expressing concerns about the exposure of its trade secrets.
This case is part of an event-driven trade secret protection lawsuit, with prosecutors and Headlands pursuing accountability for code misappropriation through both criminal and civil avenues, involving the flow of funds and collaboration related to Tower's investment in One R Squared; the beneficiaries are Headlands maintaining its algorithmic barriers, while the pressured parties are the accused Ho and his related trading entities, as well as potential co-defendants facing joint scrutiny.
Source: Public Information
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Headlands Technologies views "Atoms" and "Alphas" as core building blocks, developed at a cost of over $1 billion for automated trading strategies that generate billions in profits; Ho, a Cambridge computer science graduate, joined in 2019 with near-complete access to the code, secretly launching One R Squared during his tenure and continuing to use related components after leaving, highlighting typical vulnerabilities in internal permissions and post-employment non-compete controls in quant firms.
Funds and resources primarily entered One R Squared through Tower Research Capital's investment of approximately $15 million, with the latter using Headlands technology for trading in the Chinese market and subsequent CME and ICE trades; the motivation was to quickly acquire profitable high-frequency strategies rather than develop from scratch, thus shortening the cycle in talent and strategy competition.
Similar cases can be seen in the trade secret disputes between Jane Street and Millennium, as well as the strict protection of core algorithms by several high-frequency trading firms; the current case is in a phase where the competition for talent in the quant industry is shifting from civil non-compete to criminal accountability, with prosecutors using the over $1 billion valuation of the code as the basis for charges, attempting to clarify that algorithms can constitute property that can be stolen.
Essentially, this involves the transfer of pricing power and restructuring of the industry chain: as the core value of high-frequency trading shifts from computing power and data to hard-to-replicate internal algorithm components, employees leaving with code and collaborating with competitors become a direct threat; Headlands is attempting to transform "internally built modules" into barriers that cannot be easily leaked through concurrent criminal and civil accountability, thereby changing the industry's risk pricing regarding talent mobility and code protection.
ABAB News · Cognitive Law
Algorithmic barriers are more fragile than talent mobility
Internal access = potential external profits
Criminal accountability turns trade secrets into property that can be convicted