Citadel Securities finds itself embroiled in a legal clash with two former employees who ventured into the cryptocurrency realm, contending they've become targets of "corporate intimidation".
Key takeaways about the Citadel Securities'
- Citadel Securities is in a legal dispute with former employees, Alex Casimo and Leonard Lancia, over alleged "corporate intimidation."
- Casimo and Lancia left Citadel Securities to establish Portofino Technologies, prompting legal action by Citadel, claiming premeditation.
- Portofino countersued, accusing Citadel of "coercion and meddling" in a New York lawsuit.
- Ken Griffin, founder of Citadel, expressed concerns about cryptocurrency, citing regulatory uncertainty.
- Casimo and Lancia, leaving Citadel, founded Portofino, specializing in digital asset technology.
- Portofino secured over $50 million in funding from investors like Valar Ventures and Global Founders Capital.
- Citadel initiated legal proceedings in London, alleging employment agreement breaches by Casimo and Lancia.
- Citadel also filed a lawsuit in New York, accusing Portofino of theft of "trade secrets" and deceptive practices.
- Portofino sought dismissal of the U.S. suit, emphasizing the European nature of the dispute and desire for resolution.
- Portofino denied trade secret theft, alleging Citadel's intimidation tactics.
Alex Casimo and Leonard Lancia, former associates of Citadel Securities, embarked on their entrepreneurial journey by establishing Portofino Technologies. Citadel has initiated legal proceedings against them, asserting that the launch of their enterprise had been premeditated prior to their departure. In response, Portofino has accused Citadel of employing "coercion and meddling" as part of their defense strategy against a lawsuit filed in New York.
Ken Griffin, a prominent figure in the financial industry, has expressed strong reservations about cryptocurrencies in recent times. The billionaire founder of Citadel and Citadel Securities voiced concerns in October 2021, citing the "lack of regulatory clarity in the cryptocurrency space" as a deterrent for their involvement. Griffin underscored his reluctance to embrace the regulatory uncertainty that some of his peers appeared willing to embrace, characterizing crypto as a "jihadist call" against the US dollar.
In contrast, Alex Casimo and Leonard Lancia held a more optimistic perspective on cryptocurrency. Departing from Citadel Securities Europe in March 2021, they swiftly launched Portofino Technologies in the following month. This Swiss-based startup specializes in high-frequency trading-grade technology for digital assets.
Their venture garnered significant attention when, in September 2022, they publicly announced securing funding exceeding $50 million from prominent investors, including Valar Ventures, Global Founders Capital, and Coatue. Notably, Valar Ventures boasts Peter Thiel among its founders, while Global Founders Capital has a history of investments in companies such as Slack, Zalando, and HelloFresh spanning two decades.
However, the path for Portofino has been marred by legal disputes initiated by Citadel Securities. Citadel's European arm initiated legal proceedings in London in June 2022. Central to Citadel's grievance is the alleged breach of employment agreements by Lancia and Casimo, who stand accused of soliciting fellow Citadel Securities employees—a claim vehemently refuted by the accused. A hearing at the London Court of International Arbitration is scheduled for the coming year.
Citadel's legal pursuits have not been limited to Europe alone. In May of the same year, Citadel commenced legal action against Portofino in the United States, filing a lawsuit in New York. The allegations included the theft of "trade secrets" by Portofino's founders and the dissemination of deceptive information among their colleagues. In response, Portofino characterized Citadel's legal actions as "unfounded, anti-competitive, and emblematic of corporate bullying".
The most recent development in this ongoing legal saga unfolded as Portofino submitted a motion to the US District Court for the Southern District of New York, seeking the dismissal of the suit. Portofino argued that the dispute is fundamentally European in nature and pointed to Citadel Europe's choice of pursuing litigation in London. Additionally, Portofino expressed a desire to expedite the resolution of the London case to enable them to conduct their business without the specter of Citadel Securities' "coercion and meddling."
Portofino categorically denied any involvement in trade secret theft and maintained that the allegations were primarily intended to intimidate other Citadel Securities employees who might be contemplating a similar career transition. The motion also noted a shift in Citadel Securities' stance toward crypto after Griffin's remarks in October 2021. In March 2022, Griffin acknowledged the need for "serious consideration" of cryptocurrency market-making within the firm, marking a noteworthy change in perspective.
The motion further revealed that in December 2021, "Citadel Europe's outside counsel began 'demanding information from Portofino and its founders, and soon after began shaking down Portofino's recruiters, investors, and potential investors for information about Portofino, including by threatening litigation."
In January 2022, Griffin divested a $1.2 billion stake in Citadel Securities to venture capital firms Sequoia and Paradigm. CEO Peng Zhao indicated that these funds would facilitate Citadel's expansion into new asset classes, including cryptocurrency, as reported by the Financial Times.
A representative from Citadel Securities responded to these allegations by asserting that Lancia and Casimo had clandestinely formulated and launched a crypto market-making firm while still in Citadel's employ. They alleged that the duo had misled colleagues and conducted covert investor meetings, promoting their access and advantages acquired during their tenure. Additionally, Citadel Securities pointed to the undisputed attempt by Lancia and Casimo to improperly recruit Vincent Prieur, a New York-based Citadel Securities employee known as the "aggregator of all things crypto."
The representative emphasized Citadel Securities' history of supporting employees who embark on entrepreneurial ventures. However, they added that when such endeavors involve deceptive practices, they would hold individuals accountable.
Notably, Vincent Prieur, who subsequently joined Portofino, had also been the subject of legal action by Citadel Securities, although the matter was reportedly resolved out of court, as reported by Bloomberg.
A spokesperson for Portofino firmly denied all allegations put forth by Citadel Securities, asserting their innocence in the matter.
By: Chris Johnston
September 24, 2023
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