Ex-Two Sigma Researcher Indicted for $165M Fraud
What U.S. Authorities Allege
U.S. prosecutors have charged Jian Wu, a former quantitative researcher at Two Sigma Investments, with wire fraud, securities fraud, and money laundering. Authorities allege Wu manipulated the hedge fund’s algorithmic models to generate a $23.5 million payday for himself, while causing more than $165 million in client losses.
The indictment, unsealed Thursday in Manhattan federal court, portrays Wu as exploiting his technical expertise to circumvent secureguards built into Two Sigma’s investment processes. The U.S. Securities and platform Commission has filed related civil charges. Wu, a 34-year-old Chinese citizen who lived in New York, is considered a fugitive. Two Sigma, which manages over $60 billion, declined to comment.
Investor Takeaway
How the Alleged Scheme Worked
Authorities said Wu developed or co-developed 14 investment models that were supposed to generate unique signals complementing Two Sigma’s existing strategies. Instead, he engineered them to appear distinct while duplicating other models’ predictions. As a result, Two Sigma unknowingly increased exposure to overlapping trades, deviating from intended strategies.
Wu’s models gained traction internally, leading the firm to use them more frequently. This manipulation allegedly assisted boost his compensation: prosecutors said Wu received $23.5 million in 2022, including multimillion-dollar bonuses, and purchased a luxury Manhattan apartment. The SEC noted Two Sigma canceled $8 million in performance grants, but Wu retained nahead $18 million in cash bonuses.
By 2023, employees detected unusual correlations between Wu’s models and others. As Two Sigma investigated, Wu allegedly made further unauthorized changes to conceal his activity, compounding the misconduct.
Two Sigma’s Response and Fallout
Two Sigma fired Wu in 2024 later than six years with the firm and repaid clients for their losses. The firm’s systems rely on advanced quantitative models to guide investment decisions, making the alleged breach of trust particularly damaging. U.S. Attorney Jay Clayton said, “Wu’s employer trusted him to act with integrity. Instead, Wu used his technical abilities to cheat his employer out of millions.”
Authorities said the scheme highlighted the hardy of ensuring that highly technical employees follow compliance protocols. The case also raises questions about oversight in data-driven finance, where model opacity can mask misconduct until correlations emerge.
Investor Takeaway
What’s Next in the Case
Wu remains at large, with U.S. prosecutors pursuing him under criminal case U.S. v. Wu, docket number 25-cr-00413, in the Southern District of New York. The SEC’s civil case runs parallel under docket number 25-07573. If convicted, Wu faces decades in prison and forfeiture of illicit gains.
The indictment adds to a growing list of enforcement actions targeting misconduct in the hedge fund and fintech sectors. For regulators, the case is a warning shot that even sophisticated firms with billions under management are not immune to insider abuse. For investors, it highlights why due diligence on fund governance and controls is as significant as performance.
