A former quantitative researcher at Headlands Technologies LLC is facing federal criminal charges for allegedly stealing proprietary source code that the firm invested more than $1 billion to develop.

Cheuk Fung Richard Ho was indicted in the Southern District of New York on charges of theft and attempted theft of trade secrets. He has pleaded not guilty and is seeking to have the charges dismissed.

What allegedly happened

According to the indictment, Ho misappropriated key proprietary components of Headlands’ trading infrastructure between July 2019 and August 2021, while he was still employed at the Chicago-based quantitative trading firm. The stolen elements are known internally as “Atoms” and “Alphas,” which are essential building blocks of the firm’s algorithmic trading strategies.

Ho resigned from Headlands in July 2021. That same year, he launched a competing firm called One R Squared, or ORS, reportedly leveraging the misappropriated code to give his new venture a competitive advantage.

Headlands first moved against Ho in June 2023, filing a civil lawsuit in connection with the alleged theft. The criminal indictment came later, unsealed on January 8, 2025, leading to Ho’s arrest in Los Angeles. The charges carry a maximum penalty of ten years in prison.

Why this case is unusual

Criminal prosecution over trade secrets in the quantitative finance industry is genuinely rare. Civil lawsuits between firms and departing employees are common enough to be almost routine.

Ho’s defense appears to lean into the tension surrounding employee mobility and intellectual property, emphasizing these complexities in seeking dismissal of the charges.

But the prosecution’s case hinges on something more concrete than knowledge transfer. The allegation is that Ho copied specific source code components, not just that he remembered how Headlands’ strategies worked.

What this means for investors

For investors allocating capital to quantitative strategies, the case highlights a fundamental risk that rarely makes it into pitch decks. The value of a quant fund is almost entirely embedded in its intellectual property. Headlands’ $1 billion-plus investment in its algorithms underscores just how much capital is at stake when a single researcher decides to go rogue.