Ex-CME programmer pleads guilty to trade secret theft

By Terry Baynes

(Reuters) - A former software engineer for CME Group Inc pleaded guilty on Wednesday to stealing trade secrets in a scheme to set up a Chinese exchange.

Chunlai Yang, a 49-year-old Chinese national with U.S. citizenship, admitted to downloading more than 10,000 files of CME's computer source code used in electronic trading platforms, according to a plea agreement released by the U.S. Attorney's Office for the Northern District of Illinois.

Yang, who had a PhD in physics and started working for CME in 2000, wrote computer code for the company and had access to the company's proprietary software for its global trading platform. Between late 2010 and June 2011, he used USB drives to transfer company files containing source code to his personal hard drives, the U.S. Attorney said in a statement.

CME reported Yang's conduct to federal authorities and helped with the investigation, the U.S. Attorney said.

A senior engineer at the time, Yang was arrested in July 2011 and released on a $500,000 bond.

He admitted that he and two unnamed business partners had plans to form a business that would increase trading volume at the Zhangjiagang chemical electronic trading market and establish a leading exchange in China.

Yang pleaded to two counts of trade secret theft, and faces a $250,000 fine for each count as well as a prison sentence of up to 10 years. Sentencing is scheduled for February 20, 2013.

Edward Genson, a lawyer for Yang, did not immediately respond to a request for comment.

CME operates several prominent derivatives exchanges, including the Chicago Board of Trade and the Chicago Mercantile Exchange. The company did not immediately return a call for comment.

The case reflects a broader government effort to crack down on computer crimes and corporate espionage.

In one of the most high-profile cases, federal prosecutors accused former Goldman Sachs Group Inc computer programmer, Sergey Aleynikov, of stealing high-frequency trading code.

A federal jury found Aleynikov guilty in December 2010. But a federal appeals court in New York overturned that verdict in February, setting Aleynikov free after he had served 11 months of an eight-year prison term. The Manhattan district attorney is now pursuing charges against Aleynikov.

The case against the former CME programmer is USA v. Yang, U.S. District Court, Northern District of Illinois, No. 11-458.