US charges fired Two Sigma quant researcher with fraud

Core Viewpoint - A former quantitative researcher at Two Sigma Investments has been indicted for fraud, manipulating algorithmic models to generate $23.5 million for himself while causing $165 million in harm to clients [1]. Company Summary - Two Sigma Investments, founded in 2001, is a New York-based hedge fund with over $60 billion in assets under management [3]. - The firm terminated Jian Wu's employment in 2024 after six years and repaid clients for the losses incurred due to his actions [2][3]. - Two Sigma's investment models are designed to analyze data and make predictions for trading, but Wu created models that circumvented the firm's requirements, leading to unintended trading strategies [4]. Incident Details - Jian Wu allegedly created or assisted in creating 14 models that duplicated existing predictions, which led to significant financial losses for clients [4]. - Wu was compensated $23.5 million in 2022, with part of the funds used to purchase a multimillion-dollar apartment in Manhattan [5]. - The fraudulent activities began to be uncovered in 2023 when employees noticed unusual correlations between Wu's models and others, prompting an internal investigation [5]. Legal Proceedings - Wu faces multiple charges, including wire fraud, securities fraud, and money laundering, and is currently a fugitive [1][2]. - The U.S. Securities and Exchange Commission (SEC) has also filed civil charges against Wu, and Two Sigma has canceled $8 million in performance grants but has not recouped $17.8 million in cash bonuses from him [2][6].