Jane Street’s India Profits Likes War and the Millennium

(Bloomberg) — Jane Street Group’s soaring profits have emerged as a key element in its legal battle with two former brokers and Millennium Management over their alleged theft of a multi-billion-dollar Indian private equity scheme.

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In April, Jane Street sued Millennium and former traders Doug Schadewald and Daniel Spottiswood for stealing a “very valuable” strategy, which caused huge losses. But lawyers for the defendants said in a previously confirmed motion released on Monday in an amended version that Jane Street India’s polling team actually posted record results months after the brokers withdrew. in Izzy Englander’s hedge fund group.

US District Judge Paul Engelmayer, in New York, on Wednesday, ordered Jane Street to explain in detail on Oct. 29 whether it intends to calculate its claim for damages for lost profits. Millennium and the two former traders had argued that Jane Street should be forced to disclose how it calculates its profits and losses, including identifying which trading methods produce results.

The profit dispute raises the possibility that Jane Street, one of Wall Street’s most secretive firms, may end up disclosing its financial information in court more than elsewhere. Millennium and the two traders cited profit-and-loss statements disclosed by Jane Street in the lawsuit to explain how its Indian options group hit a hot spot almost as soon as the suit was filed.

The Most Beautiful Month

Millennium is also subject to publication orders. Responding to the defendants’ submission in a Monday report released in a redacted version on Thursday night, Jane Street said Millennium’s statements showed that profits from the firm’s India business had increased by “orders of magnitude” since the start of the period. the same.

Schadewald, Spottiswood and Millennium deny stealing trade secrets. The two traders have claimed to build an Indian options business on Jane Street, but say their business is based on experience and expertise rather than “algorithms or automated signals.” According to the defendants, Jane Street’s lack of economic hardship also undermines the “frivolous” suit, which is primarily aimed at scaring other workers into leaving.

A spokeswoman for Jane Street declined to comment. A spokesman for Millennium declined to comment on the decision but did not immediately respond to a request for comment on the latest Jane Street filing.

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Jane Street said in its suit that its profits using this strategy fell by 50% in March, which it says could only be explained by a large competitor using the same strategy.

But the defendants say Jane Street’s profit and loss statements, which are being certified, show that April was its best month for trading in India’s options, and the run continued. in the next two months.

“April through June was the most profitable three-month period in Jane Street’s history in this market,” said Millennium, Schadewald and Spottiswood. They also cited a heavily redacted email from a Jane Street executive in which he allegedly admitted that worries about falling profits could be a “false image” caused by “paranoia.” Jane Street disputes that account of the manager’s email.

‘Additional Benefits’

The figures were disclosed in the defense case, but Jane Street told the court that the proposed scheme produced a profit of $1 billion last year.

Jane Street has argued that it can still claim lost profits even if its Indian options business continues to be profitable.

“Such damages account for any additional profits Jane Street would have made but for defendants’ misappropriation,” the firm’s attorney wrote in a Sept. 13 letter. Jane Street said the “but” claim would require expert review, including Millennium’s business data and profitability.

In a filing released on Thursday, Jane Street noted that Millennium previously reported that the India desk led by Schadewald had generated a profit of $4 million as of April 19. Jane Street said that Millennium’s profit and loss statements show that the number increased only 11 times. days later and many times later. The figures and dates were highlighted from the file.

“The P&L rapidly increased by an order of magnitude was fully consistent with the defendants’ intent to move as quickly as possible,” Jane Street’s lawyer wrote.

Citing people familiar with the matter, Bloomberg reported last month that the firm was on track for a record 2024 first-half revenue of $8.4 billion, a 78% increase from the same period. last year. Adjusted earnings in the first half nearly doubled to $6.1 billion.

In an update to investors earlier this year, Jane Street said its recent growth has been driven by continued high equity and voting volume as well as strong flows of exchange-traded funds.

Exploding the Market

Jane Street said in its September filing that the defendants’ demand that it lower its profits “on a trade-by-trade-confidential basis” was unreasonable and premature at this stage of the case.

Engelmayer on Wednesday said he agreed that Jane Street would not commit to specific damage figures at this time. But he ordered the firm to periodically provide interim estimates of damages based on the best information available to it, including setting out the basis for those estimates.

The firm pointed to the drop in profits when it argued in April for an injunction against Schadewald and Spottiswood using the Millennium scheme. Engelmayer rejected Jane Street’s claim at the time, but said the firm could be awarded damages if it was found to have suffered.

Many of the court filings in the case have been sealed or redacted because of the trade secrets at their heart. The fact that the scheme involved Indian voter trading was inadvertently revealed in a court hearing soon after the case was filed.

No trial date has been set, but discovery in the case will end in March, with a pretrial conference set for April 9.

The Indian options market has exploded in size over the past five years, gaining interest from players such as Citadel Securities and Jump Trading as well as Jane Street and Millennium. The national securities regulator last week introduced a series of measures aimed at protecting retail investors who also participate in the market and often lose a lot of money.

The case is Jane Street Group LLC v Millennium Management LLC, 24 cv 02783, US District Court, Southern District of New York (Manhattan).

(Updates with information on Millennium India’s profits from the latest Jane Street court hearings, starting in the fifth paragraph.)

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