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UK Private Prosecution – Nightmare for One Alleged Trade Secrets Thief

What is any alleged trade secrets thief’s WORST nightmare?

A UK hedge fund company that has a “Zero Tolerance” approach to the theft or attempted theft of its IP; moves wicked fast when that threat rears its ugly head and has the resources to not let up—ever!

That is what has happened to one alleged trade secrets thief in the U.K. named Ke XU. Just when XU might think the nightmare he’d created for himself is over, and return to China, he finds out it’s not over yet.

OBJECTIVE OF THIS POST

For purposes of this post, we will examine the prompt steps  G-Research took in an effort to prevent its trade secrets from being passed on, and its relentless pursuit of justice through the UK’s “private prosecution” procedure.

BACKSTORY

In 2012 XU, a math prodigy was employed by G-Research–a UK hedge fund.

In 2014, so the story goes, because XU was not satisfied with a £400,000 bonus, he chose to move on but not without allegedly leaving with some of the G-Research’s trade secrets.

XU TAKES OFF

One evening, XU abruptly drops a note for his G-Research boss and leaves the facility with a suitcase in which he is videotaped storing a number of documents and electronic devices.

G-RESEARCH REACTS FAST

G-Research reviewed the video of XU departing with the suitcase the next morning and responded so fast it’ll make your head spin:

  • Company lawyers get a court order directing XU to return with their property
  • The court orders XU to turn in his passport (except XU was already on a flight to Hong Kong)
  • Company investigators are waiting for XU at the Hong Kong airport
  • According news reports, the investigators approached XU but he denied he was their guy. (It appears that since the investigators were unable to confirm his identity he was not put under immediate surveillance.)
  • Hong Kong judge imposes a travel ban on XU.
  • The next day XU tried to leave from the Hong Kong airport but is informed that he couldn’t.
  • He then takes a train to the border and hands-over a desktop computer and 3 laptops to his wife’s parents. (It appears he wasn’t under surveillance when he returned to the airport or on the train to the border, which may have been a missed opportunity.)
  • However, investigators were waiting for XU at his wife’s law firm in Hong Kong where he denied having any devices except his iPhone
  • Back in London, G-Research files a complaint with UK police
  • UK police search his London apartment and appear to come up empty
  • Nevertheless, UK police notify Hong Kong authorities and XU is arrested
  • UK authorities request his extradition back to the UK which XU willingly waives

COURT APPEARANCE #1

  • Under the “proceeds-of-crime” law, the judge orders XU to give up any confidential information, as well to reveal whom the information was shared with
  • After an interview by UK detectives, XU refused to provide any constructive information and was sentenced to 13 months imprisonment.
  • The case appeared to have come to an end…except…arriving on the scene is the UK “private prosecution” option

UK PRIVATE PROSECUTION

In the UK if the government chooses to not devote any more public resources to a case for any variety of legitimate reasons, the victim can ‘Privately Prosecute” the case. And, the attorney representing the company is officially acting in the capacity of the “Crown” prosecutor.

Here’s a quote from the South China Morning Post news article titled, “A Chinese Math Prodigy Turned Hedge Fund Coder, and The Stolen Strategies That Cost Him His Freedom” by Kit Chellel and Jeremy Hodges:

“In Britain, aggrieved financial companies have another tool to deploy in defence of their secrets: an ancient quirk of the legal system called a private prosecution. This approach allows the purported victim of a crime to investi­gate and prosecute the perpetrator if the state fails to do so.

In theory, private prosecutions are available to anyone who wants to bring a criminal complaint. They have been launched in the past by the parents of a murdered teenager and a conservative activist who accused a gay media outlet of blasphemy. But building a case is expensive, so the prac­tice is now used mostly by businesses and others with a few million pounds to spare.”

And G-Research in this case had the resources to fully utilize this UK procedure.

RELENTLESS AND METHODICAL PRESSURE ON THE XU

With the assistance of private investigators, lawyers, and IT specialists G-Research started to put a case together against XU.

COURT APPEARANCE #2

One month before XU was to be released, G-Research charged him with five counts that included his refusal to provide a credible explanation of the missing computer(s) location(s) or how the trade secrets were used.

Essentially all he would say is that his parents discarded the computers.

At one point of the trial, XU’s mother testified remotely and claimed that on one particular morning—at the crack of dawn—she and her husband had thrown the computers into a river in their hometown. Except, unbeknownst to her, at the specific time she claimed to have done this, her home was under 24 hours surveillance by private investigators.

The investigators provided documentation and testified that neither XU’s mother nor father had left their home at the time she claimed to have hurtled the computers out for an early swim. In fact, the PIs had rented a nearby flat and had XU’s parents under surveillance for the previous 11 months

XU IS SENTENCED AGAIN

XU is convicted on two counts for not detailing where the trade secrets went and who had access to it. He was sentenced to 18 months.

STRONG SIGNAL TO OTHERS

It is reported that G-Research has a reputation for passionately protecting its IP. As reported in the above article, a G-Research representative allegedly once communicated the following to a former employee:

“We will use every weapon at our disposal to stop you selling what we believe is effectively our system to the street,” Edwards wrote. “Win or lose we will certainly delay you, perhaps considerably, and we will also send a strong signal to others not to mess with our IP.”

This reminds me of how Snapchat is reported to have addressed their employees concerning the leaking of company trade secrets in 2017.

Here is a quote from my January 29, 2018 blog post titled, “Snapchat Employee Leaks–Potential Damage Chronically Misunderstood (Trade Secrets Protection”)

“If you leak Snap Inc. information, you will lose your job and we will pursue any and all legal remedies against you.”

“And that’s just the start. You can face personal financial liability even if you yourself did not benefit from the leaked information. The government, our investors, and other third parties can also seek their own remedies against you for what you disclosed. The government can even put you in jail.”

XU IS RELEASED…WELL…NOT SO FAST…

COURT APPEARANCE NUMBER #3

Toward the end of his 18-month sentence, (for a total imprisonment period of 3 years, seven months,) the employer instituted another legal action for breaching his confidentiality agreement.

In addition, G-Research lawyers filed another action that required XU to stay in the UK.

Plus company lawyers made the argument that XU’s continued failure to reveal what he’d done with the trade secrets was “contempt of court.”

Before the judge sentenced XU to another 13 months, the judge is quoted as saying, “Mr. Xu has neither admitted his contempt nor expressed remorse.”

To my knowledge, as of this posting, XU remains in jail.

FINAL THOUGHTS

This illustrates a number of things. It shows the resolve of one company to fight for their IP and to send a loud and clear message to prospective trade secrets thieves, that if you go that route, they will use all legal means to hold you accountable.

It is a model for all companies that have the financial resources to bear the expense of a thorough private investigation and litigation to follow.

“Zero Tolerance” is key.

Note: Although the U.S. and most other jurisdictions around the world have no “private prosecution” option, the basic premise of developing information through private investigation to present to law enforcement for potential prosecution remains an option. See my previous blog post titled, “Does the IP Industry Reach Out to Federal Law Enforcement Enough?”

Disclaimer: IPPIBlog.com is offered as a service to the professional IP community. While every effort has been made to check information in this blog, we provide no guarantees or warranties, express or implied, with regard to content provided in IPPIBlog.com. We disclaim any and all liability and responsibility for the qualification or accuracy of representations made by the contributors or for any disputes that may arise. It is the responsibility of the readers to independently investigate and verify the credentials of such person and the accuracy and validity of the information provided by them. This blog is provided for general information purposes only and is not intended to provide legal or other professional advice.

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Ron Alvarez is an IP Protection and Investigations specialist at XG Consultants Group, Inc., in New York City. He is a former NYPD lieutenant where he investigated robbery, narcotics, internal affairs, and fine art theft cases. Ron is a graduate of the FBI National Academy and earned a B.A. in Government and Public Administration from John Jay College of Criminal Justice in Manhattan. He has published a number of articles on various topics for PI Magazine. Ron is licensed in New York State.

2 comments on “UK Private Prosecution – Nightmare for One Alleged Trade Secrets Thief

  1. Well done. Hope this leaves a message to future potential thieves.

  2. Ron Alvarez

    Thank you for your comment, Amar. We certainly hope so.

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