Seventh Circuit Finds Clear Error on Loss Calculation in Trade Secrets Sentencing

The Seventh Circuit Court of Appeals on Wednesday found clear error in the sentencing of a quantitative finance professional who pleaded guilty to unlawfully possessing and transmitting trade secrets.  The defendant, twenty-eight year old Yihao Pu, stole expensive and proprietary high-speed securities trading software with the hope to use it for his own pecuniary gain.  Unfortunately for Pu, he ended up losing money on the scheme.  Already out $40,000, things got worse for him when his employer, financial giant Citidel, caught on.

From 2009 through 2011, Pu worked at two financial companies using their software systems to conduct trades for their clients.  He illegally copied files during his time at both companies using personal electronic storage devices and employed those files to conduct personal trades for his own benefit.  The wheels came off when Citadel grew increasingly suspicious of activity on Pu’s work computer and conducted an internal investigation revealing the extent of his criminal actions.

Charged by a grand jury with twenty-three criminal offenses, Pu avoided trial by pleading guilty to one count of unlawfully transmitting a trade secret as to Citadel and another count of unlawfully possessing a trade secret as to the other company.  At sentencing, the parties agreed, and the district court found, that there was no actual monetary loss—again, Pu had himself lost $40,000 by the time the government put a stop to his illegal trading.  The district court instead looked to how much money the companies paid their employees to develop the algorithms and source code that Pu stole, arriving at a loss amount of over $12,000,000.  This large-dollar loss calculation increased what would have been a sentencing offense level of nine by twenty points—more than 200-percent for those keeping score.  After a departure downward from the guidelines, the court sentenced Pu to three years’ imprisonment.  The court also ordered Pu to pay more than $750,000 in restitution for the money Citadel paid forensic analysts and attorneys to investigate his conduct based largely, if not solely, on a letter from Citadel reflecting its claimed expenses.

Not okay on either count, said the Seventh Circuit.
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