SXP Analytics Files for Bankruptcy Amidst Litigation
Milwaukee-based SXP Analytics LLC has filed for Chapter 11 bankruptcy protection. The company is owned by Emmanuel Mamalakis, a 36-year Milwaukee lawyer, start-up financier and major political contributor who said the filing was prompted by litigation and not operational issues.
The firm is a high-frequency stock trader, meaning it uses elaborate mathematical formulas and powerful computers to buy and sell shares quickly, sometimes within fractions of a second. The company’s trading strategy is controversial because it relies on algorithms devised by PhD mathematicians that allow them to swoop in and out of stock positions in fractions of a second. SXP reaps minuscule profits per trade, but it make thousands of trades involving millions of shares each day.
The company has been sued by Houston-based Quant lab Financial, a competitor who has accused SXP of intellectual property theft. The charges are based on two men who partnered in the venture with Mamalakis - Vitaliy Godlevsky, who holds a PhD in physics, and Andriy Kuharsky, who has a PhD in math. Both previously worked for Quant lab which has accused them of stealing its software and other proprietary information around the time they left.
Quantlab’s civil case alleges a conspiracy to steal Quantlab’s trading algorithms, computer code and other trade secrets. The suit remains open, with more than 200 entries on the docket so far. The accusations of business espionage also triggered a three-year criminal investigation that concluded with no charges issued.
Jerome Kerkman, SXP’s bankruptcy lawyer, said the firm remains profitable and in court documents, a former employee put that number at as much as $100,000 net a day as of early 2011.
But Kerkman noted that the Quant lab lawsuit, “is essentially draining the profits and draining the company.” He said that Chapter 11 gives SXP negotiating leverage and offers “some added protection so you can keep the business.”