
The Triple Jeopardy of a Chinese Math Prodigy - vthallam
https://www.bloomberg.com/news/features/2018-11-19/the-triple-jeopardy-of-ke-xu-a-chinese-hedge-fund-quant
======
russellbeattie
Another story of a big corporation using the courts to screw over an
individual. I have no doubt he was trying to steal from the company, but he
was caught, convicted and went to jail, what more do they want? For him to
spend the rest of his life in jail for being as greedy and unethical as his
former employer? The hypocrisy is incredible.

Also, it's amazing how fast the wheels of justice move when a large financial
company has been wronged, no?

~~~
avs733
Reading through the article, they seem to geoeuve they are entitled to own
people at a pretty basic level. Their argument basically comes down to 'we
paid you now you can never use that knowledge anywhere else.' it's not
physical ownership it's cognitive ownership and frankly the courts seem I'll
preppared to make such a differentiation.

To add...the deference in courts and the public is generally towards
assertions by powerful people as truth. Even when we know they have no basis,
the deference remains and frames inferences and interpretation.

Example:

>But they knew, from the tight security in the office and the imposing
nondisclosure agreements they were asked to sign, that their work was
extremely valuable

It must be valuable because it's secured. I'm not saying it's not, but
assuming it is simply because a corporation that acts in this way tries to
secure it is nonsense. It's allowing them to author a narrative simply because
you assume they act in good faith.

~~~
C1sc0cat
That's how Uk and US labour law works work you do for you employer is theirs -
and work out of hours "related" to you employment.

Plenty of places have secure rooms I went to an interview at an online gaming
company and they had biometric locks on some rooms.

And I have been to more than one interview where you leave any electronics
outside the building

------
n4r9
I nearly went to interview with G-Research when I moved near London and was
looking for jobs a couple of years ago. I hadn't been that interested in
algorithmic trading, but when a rectuitment agent mentioned a 120K starting
salary it perked my interest. That might not sound like much to Valley types
but for a first tech job in London it's mental.

They sent me one of those online automated coding tests; I prepared for
several days, which turned out to be unnecessary as the test was quite
straightforward. I completed both questions in the "choose one of the
following" section, and an SQL question despite never having used SQL. I think
the test was just there to filter out chaff, but they were very keen to get me
in for an interview.

I talked it over with my wife, who was also quite stunned by the salary but
pointed out that I'd literally just be moving money around to make rich people
richer. I actually also talked it over with the boss of a smaller company that
had already made me an offer. His advice, which turned out to be very wise,
was to research them very thoroughly as a lot of city firms like this will
offer big bucks but will suck the soul out of you.

I then spoke about it with a friend who mentioned that one of _his_ friends
worked there. This is when I discovered their paranoid security practices,
such as handing in your mobile phone as soon as you enter the building. That
was the final straw in my head... no doubt they had their reasons but a
culture of paranoia was not what I wanted at all.

Going back to how keen they were to get the interview, I remember telling the
recruitment agent that I wasn't that interested and that I was going on
holiday shortly which would cut down on opportunities to "just go in and see
what it's like anyway". At this point he said I could literally name any time
of night or day to go to their office, or I could speak on the phone with one
of their guys who was currently in Spain for some reason. It started coming
across as weirdly desperate.

I ended up going with the offer from the smaller company and have been very
happy. I read about the case of Ke Xu not long afterwards and affirmed my
conviction that I'd made the right choice.

~~~
twic
I interviewed with G-Research a while ago, and this was pretty much my
experience too.

Everyone i met there - interviewers, other developers on the team, bosses -
seemed great: really smart and absolutely lovely. I'm sure i would have
enjoyed working with them. They did some aggressive pursuing after the
interview. But ultimately, the environment was just too weird and paranoid for
me. A real shame.

------
Traster
I've got to say, I've got a lot less sympathy for Xu than most people in this
thread seem to have. Firstly, what he did was absolutely unacceptable, he
didn't just copy stuff, he went out of his way to break security procedures at
the company he worked at to steal other people's hard work. He then literally
fled the country knowing exactly what he was doing. He trafficked in stolen
goods handing the IP to his family in China where he knew that the company
would never get it back. He got his family to lie in court about the entire
thing. He still wont admit what he stole and we all know that the second he
goes free he can travel to China and sell the stolen IP. Unfortunately for Xu,
because his family lied in court about destroying the IP and because he is
from China where we all know any chance of enforcing any contracts is nil, any
return to China is basically a sign off allowing him to profit from his stolen
IP. So again, I perfectly understand why G-Research wants to stop him, every
extra month in prison is another month where he can't hand over their IP to
competitors.

I'm sorry but that is a whole head of red flags. Meanwhile, people seem to
have a problem with G-Research in what they did to track him down. They tried
to stop him travelling - seems pretty reasonable since he fled the country.
They tried to stop him leaving HK - seems pretty reasonable since he tried to
leave and succeeded in smuggling IP worth millions into mainland china. They
hired PIs to watch his family - seems pretty reasonable since they actually
DID participate in the crime and lie about it!

I feel sorry for the guy but this really does seem like an example of someone
doing pretty much the worst thing they can do in a situation and doing it to
the most powerful person they could.

~~~
saiya-jin
I agree that his actions would end up in lawsuits anywhere in modern world,
and I understand the attempt of former employers to block him as much as
legally possible. Kudos to employer for not simply hiring a hitman.

That said - who in all honesty will root for some paranoid vengeful
billionaire? I couldn't care less if he loses some 30 millions in his multi-
billion empire. Which, according to the article, shouldn't be the case -
strategies expired, the secret isn't worth anything anymore, and this is just
bullying and revenge, because he can and his ego got hurt. With almost 100%
guarantee he is 'optimizing' everything to Guernsey he can tax-wise, so
British citizens don't see anything from his vast income.

Not much sympathy for some little man with big ego and even bigger wallet.

~~~
Traster
Well let's be clear about the stakes of this. Firstly, the billionaire isn't
going to lose anything - he owns a company with dozens of different
strategies. The people who will lose out are the other engineers who designed
and built those strategies and now can't use them anymore. Even the risk of
those stategies being out in the wild opens them up to the risk of a
competitor exploiting their expected behaviour, so lot's of their work is
going to have to be re-engineered. Secondly, whilst $30m doesn't threaten the
company, having former employees thinking they can walk off with the secret
sauce does threaten the existence of the company. So it's not surprising the
most famous example of this is the one that's going to get the strongest
enforcement.

~~~
saiya-jin
There is standard codified punishment for what you describe - it isn't
anything special to quant trading, we can talk about secret sauce of many IT
companies, or companies in general. Some dev walks out of Google with their
Search code/data would be much more scary and damaging.

What we see here is punishment for the sake of punishment, from person who is
clearly amoral according to anything you can find on him online (quite a bit).
All I say is I have no sympathy for him and the case, which btw even the
company itself originally claimed would expire in +-August 2018. Yet they
still go for revenge. That's pathetic and clear abuse of legal system from my
viewpoint.

------
t_mann
"The year before, a group of five programmers and managers had left ... to
start their own trading outfit. The company ... argued that the five had
developed their quant-trading skills at the company, and so any new platform
would have to be similar and an infringement of its intellectual property."

interesting, especially when combined with how happy such companies say they
are to hire STEM graduates with zero Finance knowledge. is that what one has
to expect when entering such an industry?

~~~
zarkov99
Yes, the more elite the outfit the more security conscious and vindictive it
will be. It is defies belief how much they can get away with.

------
anfilt
Jesus Christ how is that even legal what they did to that poor man. Such non-
sense should not be legal.

~~~
avs733
Because the justice system assumes good faith by all parties...

~~~
bryanrasmussen
If the law supposes that," said Mr. Bumble, squeezing his hat emphatically in
both hands, "the law is a ass — a idiot. \-
[https://en.wikiquote.org/wiki/Oliver_Twist](https://en.wikiquote.org/wiki/Oliver_Twist)

of course Mr. Bumble is also an ass, but perhaps it takes one to know one.

------
netvarun
Can we stop using the term ‘math prodigy’ for someone who was essentially a
quant monkey - that too at best a decent one?

He ain’t no Ramanujan, or a Terrence Tao or any of the recent Fields’
medalists who have poured their heart and soul into their craft with no
expected financial return.

~~~
Khelavaster
He did, however, graduate third in his class at Cambridge, coming from a rural
Chinese background--that's prodigal.

~~~
hatmatrix
"prodigal" \- extravagant - derives from Latin: prodigus.

"prodigy" \- extraordinary - derives from Latin: prodigium.

~~~
tk75x
"prodigious" \- resembling or befitting a prodigy, causing amazement or wonder

------
binarysolo
I def feel for the guy and how he basically got years of his life ruined by a
big player, but him and his family did some pretty shady stuff with regards to
the company computers and data.

~~~
jdboyd
There may be shady behavior about data, but as I read it, the missing
computers in the story were his, not the company's.

~~~
300bps
He admitted writing code to de-obfuscate the work of his coworkers and copying
it. He gave several electronic devices including computers to his parents as
he was being hunted by authorities. He made up ridiculous stories about how
the devices were destroyed (ex: one was cremated with his relative) and his
parents were caught in court lying about throwing the computers in a river
when the company has them under surveillance 24x7.

Nobody likes being lied to repeatedly, especially courts.

------
raesene9
Whilst it seems apparent from this story that Xu was attempting to steal
information from his employer, to me the bigger story is how much access to
the justice system in the UK is predicated on wealth.

Not in the use of Allen & Overy, they're a private law firm, anyone who's got
the cash can pay them.

The ability to get the quantity of police resource use detailed in this case
assigned to a white-collar crime, would seem amazing to UK citizens who would
struggle to get that kind of response to likely more serious crimes.

------
puranjay
I'm surprised that Xu didn't simply leave Hong Kong for China.

I doubt China would be as keen to extradite one of its citizens.

Was Xu simply underestimating PdeP's wrath, or did he have more faith in the
UK legal system than warranted?

~~~
throwaway55721
This makes me think he really was innocent and wanted to resolve the issue
properly.

Otherwise, for a smart guy, he wouldn’t be very smart.

~~~
raverbashing
> Otherwise, for a smart guy, he wouldn’t be very smart.

This is the case in a lot of situations. Smartest math guy thinks legal system
works on logic and precision. They are wrong.

------
crb002
Curious how many of the "signals" they used were simply detecting LIBOR lies.

------
3327
Good Article. Be careful who you work for. Be careful who your friends are.

~~~
paulcole
Uh, also, don’t steal?

~~~
cf498
>At around that time, de Putron got involved in another legal dispute that
foreshadowed his companies’ campaign against Xu. The year before, a group of
five programmers and managers had left G-Research, then known as GR Software &
Research Ltd., to start their own trading outfit. The company responded by
first threatening a lawsuit, then, in 2011, by filing one. None of the filings
suggested anything had been stolen, but G-Research argued that the five had
developed their quant-trading skills at the company, and so any new platform
would have to be similar and an infringement of its intellectual property.

~~~
GeorgeSarkis
Intellectual property contracts are common in finance. I had a clause that, if
enforced, would have prevented me to work for two years in the industry, while
offering half my usual salary in the meantime. I think it's fair (doesn't hold
you off forever and also doesn't starve you while you're out of the game). In
my case, it wasn't enforced when I left (which is more bad news for me than
good, since it just means I wasn't valuable enough :)

------
irl_zebra
Can anyone tell me what a "trading strategy" at this level might look like?

~~~
twic
In what sense?

It's a program (or function, or object, etc) where you feed in events for
changes in market data and perhaps other things, and it feeds out commands to
buy and sell particular quantities of particular instruments at particular
prices.

AIUI, that program is typically quite simple in structure: it might work out
target prices for some set of instruments based on prices for another set of
instruments, with a function that is not necessarily more complicated than a
polynomial. Then it buys or sells if the market price is sufficiently
different to the target price.

The structure of the pricing function will be designed by a quant, and the
coefficients in it will be set by fitting to historical data. A lot of the
work goes into developing tools and practices for doing that fitting,
backtesting the fitting, etc.

------
esturk
I don't understand the logic behind the 3rd jeopardy. Was it that he didn't
show remorse? So the lawyer accused Xu made a mockery of the court and the
Judge just went with it?

While reading the 3rd part, I kept thinking "brexit logic" which I have come
to associate with British thinking that seems too idealistic to be actually
implementable. And yet apparently the entire British judicial system allows
it.

------
ajay-d
Interesting that the trading strategies have a shelf life, and they're
basically trying to keep him in court / jail until they deem those strategies
no longer valuable.

------
m23khan
Xu's actions through out the article were quiet self serving, and selfish, no?
G-Research is what it is, the behavior he exhibited while quitting and before
that, going through sensitive code at the Company is not an innocent mistake.

You have to understand that a company like G-Research could easily be put out
of business (or made to suffer severely) if their IP is stolen/disclosed - and
Xu's refusal to cooperate with authorities is Xu's own undoing, not
G-Research's.

------
baybal2
If his attempt was to disappear with something really valuable, he would've
left for Beijing without leaving a note, and let their lawyers having fun
persuading Air China to detain him on arrival.

It amazes me that in this day and time, some naive rich people genuinely
believe of some piece of code can simply magically make money out of thin air
(while some look to do so, what they do is a banal spread trading without
realising it.) Quants people... they have that habit of puffing an air of
mystique around themselves, but when you read their technobabble you can't
hold yourself from laughing.

I met a number of such, all claiming some bizarre "supersophisticated"
strategy, but even with a level of math availing me, a half baked engineer
wannabe, I can't not to notice their math being junk, to the point of it
having banal arithmetic errors. Sometimes, they resemble me the crazy guys who
are trying to invent perpetuum mobiles - people in that cult-like subculure
are not dumb for sure, engineers and mathematicians, but all having trouble
with thermodynamics, all thinking that it must me them to find a hack for the
first law.

How much of quant thing is RNG, and how much is just a cover for insider
trading, think yourself. A man like PdP, may have much more reasons to go
after Xu just for suspicion of him getting an idea of how his business was
actually making money
[https://offshoreleaks.icij.org/nodes/12016846](https://offshoreleaks.icij.org/nodes/12016846)

~~~
nostrebored
Writing off an entire field with easily understandable principles seems
absurd.

Much of the quant field is very straightforward mathematical modeling. Every
field has bad research, but writing off CS as a field because some researchers
have created a zombie out of stackoverflow code should also strike you as
wrong.

