Citadel Securities’ Trade Secrets Suit Proceeds Against Portofino

Citadel Securities’ lawsuit accusing Portofino Technologies AG of trade-secrets thefts can largely move forward against the high-frequency crypto-trading startup but not a seed investor in the firm.

US District Judge Gregory Woods in Manhattan ruled last week that he lacked jurisdiction over the investor, Jean Canzoneri. The judge on Wednesday mostly denied Portofino’s motion to dismiss the case but also threw out claims that the firm interfered with the employment contracts of three Citadel Securities workers it tried to recruit.

Citadel Securities claimed two former London-based employees, Leonard Lancia and Alex Casimo, secured funding from Canzoneri and other investors to launch Portofino in Switzerland with trade secrets stolen from the market-making firm.

In a statement, a Citadel Securities spokesperson said the firm was pleased with the ruling allowing the case to move forward against Portofino. “We look forward to pursuing our case and holding them accountable in court,” the spokesperson said.

A spokesperson for Portofino said the firm didn’t take any trade secrets and suggested Citadel Securities’ suit was in response to the startup’s success.

Woods said Citadel Securities hadn’t shown that the alleged actions of Canzoneri, a French national, had any consequences in New York justifying jurisdiction there. The judge noted that Canzoneri’s alleged investment pre-dated Portofino’s April 2021 founding and any alleged trade-secrets theft.

Canzoneri had also argued the case should be dismissed against him because Citadel Securities hadn’t adequately alleged that he “aided and abetted” any trade-secrets theft. He said the market maker was essentially claiming “that anyone who invests in a startup with knowledge of its founders’ past employment knows that they are stealing trade secrets from their old jobs.”

A lawyer for Canzoneri declined to comment. Citadel Securities also sued ten “John Does” it said were other early-stage investors in Portofino whom it had been unable to identify.

Citadel Securities filed suit last year, accusing Portofino of engaging in a “brazen scheme” to steal trade secrets and raid the ranks of the firm’s employees. Lancia and Casimo allegedly began fundraising and building Portofino before they left Citadel Securities, where Lancia was the head of Europe systematic market making for derivatives and Casimo was with the firm’s business-management team in Europe.

In its suit, Citadel Securities cited Portofino’s hiring away of Taym Moustapha, a systematic options trader, as a violation of his employment agreement. It also pointed to an unidentified employee to whom it was forced to pay “substantially increased compensation” to counter a Portofino offer.

Woods dismissed Citadel Securities claims regarding Moustapha, the unidentified employee and one other, but gave the firm leave to re-file its allegations. A claim involving another employee was allowed to proceed.

In a motion to dismiss filed last year, Portofino labeled Citadel Securities’ suit an attempt to intimidate “two employees who dared strike out on their own and to send a message to other Citadel Securities employees thinking of doing the same.”

Portofino said Citadel Securities had “not come within shouting distance of alleging” trade-secrets theft.

“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 said.