Bridgewater ‘manufactured false evidence’ in trade secrets case

Bridgewater Associates, the world’s largest hedge fund, was found to have “manufactured false evidence” by a panel of arbitrators in its attempt to prove that former employees had stolen its trade secrets.

According to court documents made public on Monday that quote findings from a panel of three arbitrators, Bridgewater was found to have “filed its claims in reckless disregard of its own internal records, and in order to support its allegations of access to trade secrets, manufactured false evidence”.

Founder Ray Dalio’s hedge fund initiated a dispute against Lawrence Minicone and Zachary Squire in November 2017 claiming that they had misappropriated trade secrets and breached their contracts.

However, a panel of three arbitrators found that Bridgewater had “failed to identify the alleged trade secrets with specificity”, knowing Mr Minicone and Mr Squire would have to fight an expensive case in order to defend against the allegations, the court filing states.

“The trade secrets as described constituted publicly available information or information generally known to professionals in the industry, and . . . Claimant [Bridgewater], a highly sophisticated entity, knew that the trade secrets as described did not constitute trade secrets,” the tribunal ruled, according to material quoted in the court filing.

Mr Minicone and Mr Squire both left the Connecticut-based hedge fund in mid-2013. The pair brought counterclaims against their former employer, which were also denied by the panel of arbitrators.

The arbitration itself was conducted behind closed doors over a period of two years, but the contents of the finding have just been made public in a court filing by Mr Minicone and Mr Squire, who are petitioning for the payment of almost $2m in lawyers fees awarded to them by the arbitrators.

Along with the trade secrets claim, Bridgewater — which manages $138bn in assets — had also accused its two former employees of unfair competition after they co-founded Tekmerion Capital Management, a hedge fund with about $60m in assets under management. 

The arbitrators found that Bridgewater’s claims had been brought in “bad faith”.

“Claimant’s actions in continuing to press its claims constitute further evidence that its intentions were not to prove misappropriation, but rather, were to adversely affect respondents’ ability to conduct a competitive business,” the arbitrators ruling stated, according to the new court filing.

Mr Minicone and Mr Squire filed their court petition against Bridgewater on July 1 to confirm the $2m in lawyers fees awarded by the arbitration panel in January and to have the full decision by the arbitrators made public.

Bridgewater has filed its own petition to have the fees thrown out, in which it said it believed the arbitrators were “mistaken” and it had “proved its trade secret and contract claims” against its former employees.

Bridgewater did not immediately respond to a request for comment. Mr Squire and Mr Minicone declined to comment.

Mr Squire joined Bridgewater in 2010 as an investment associate and spent three years at the group working with its research and trading teams. Mr Minicone, also an investment associate at Bridgewater, joined in 2008 and remained there for almost five years.

The pair helped to launch Tekmerion, a systematic global macro hedge fund, in 2017 with backing from British billionaire Alan Howard and Michael Novogratz, a former hedge fund manager at Fortress Investment Group. 

Bridgewater is known for its culture of “radical transparency”, fostered by Mr Dalio, who founded the company in 1975. Employees are encouraged to openly challenge each other and they use an internal app called “the dot collector” to provide live feedback on how colleagues are performing. 

In a TED talk Mr Dalio delivered in April 2017, he said the group had created an “ideas meritocracy” by effectively preventing employees from keeping secrets. “We literally tape almost all conversations and let everybody see everything,” he told the audience. Bridgewater has said that one in five hires leaves within a year.