The chatter at the alternative data industry’s annual shindig, the BattleFin conference at Nobu’s five-star Miami Beach resort, isn’t about the latest AI tool being unveiled but the legal fight between two of the field’s biggest names.
A trade-secrets lawsuit that had the burgeoning industry buzzing this past fall now has onlookers worried about the fallout for the entire sector and its clients thanks to recent legal moves by the Carlyle-backed Yipit and the Jefferies-owned M Science.
Alternative data is a catch-all term for information that traders use beyond typical market data, such as stock prices and earnings reports. The industry has exploded over the past decade as credit-card transactions, geolocation-tracked foot traffic, and web-scraping bots have provided hedge funds with insight into companies’ statuses.
Yipit originally sued two former employees, Alex Pinsky and Zachary Emmett, in October, accusing them of stealing “secret information at the heart” of its business. The lawsuit said the pair shared the information with the firm’s rival M Science, a data provider that, like Yipit, is ubiquitous across hedge funds.
In a motion filed in the federal district court in Manhattan on Thursday, Yipit is hoping to add M Science; its CEO, Michael Marrale; and Valentin Roduit, its former chief revenue officer, as defendants. The new filing says: “M Science, Marrale, and Roduit encouraged and directly participated in Emmett and Pinsky’s theft of Yipit’s trade secrets.”
M Science and Marrale declined to comment. Roduit, who left M Science in November, according to his LinkedIn profile, did not respond to requests for comment. An attorney for Pinsky did not respond to requests for comment. No email address, phone number, or legal counsel could be found for Emmett.
M Science on Tuesday brought its own lawsuit against Yipit, accusing the credit-card-data company of many of the same practices.
M Science claims Stephen Luban, a Yipit vice president who previously worked for the Hong Kong hedge fund Tybourne Capital, was granted an M Science login to access the data provider’s reports while working for Tybourne. When Luban joined Yipit, M Science’s suit alleges, he continued to use his M Science login to access his now-competitor’s report and data.
The M Science complaint says Luban used his login nearly 200 times from 2020 to 2022, alleging he accessed data that “someone in a product development role at a competitor could use to gain an unfair advantage over Plaintiffs in developing or enhancing the specialized in-depth research that Plaintiffs’ customers are willing to pay substantial sums for.”
Luban did not respond to a request for comment. Yipit said in a statement: “This complaint is nothing but a meritless smokescreen concocted by M Science.”
“The allegations in this case are circumstantial, magical thinking by M Science and relate to purported events from five years ago, demonstrating their complete lack of merit,” the statement added.
The result of this dirty laundry airing is an industry on edge, said Don D’Amico, the founder of Glacier Network, which advises data buyers and sellers.
“We are all in this connective chain of data collection and data delivery. There was an understanding among the players that disputes could be settled between one another,” said D’Amico, who was previously the general counsel for the data consultancy Neudata.
“All of this stuff is done on a trust basis, and it’s been eroded,” he added.
An uneasy marketplace
The original Yipit lawsuit alleged Pinsky and Emmett stole information on Yipit’s hedge-fund clients, including those with approaching renewal dates that could be targeted by M Science, where the pair worked after Yipit. It accused Emmett, who joined M Science after Pinsky did, of downloading client information to personal devices as he was leaving Yipit, via messaging platforms on Facebook and LinkedIn. The original suit said he attempted to conceal files by renaming some with titles like “ZEtaxes2024.”
Yipit’s motion claims the pair of salespeople did not act alone but were encouraged by M Science’s leadership.
“The examples of Marrale’s, Roduit’s, and M Science’s intentional acts of theft and conspiracy” will be outlined in the amended complaint, the filing says. The filing adds that it has “reached settlements in principle” with its two former employees but could not reach an agreement with M Science.
M Science, meanwhile, accuses Yipit and its employees of conduct “contrary to honest industrial and commercial practices.”
While it’s not clear whether these fights will be settled before a trial, there’s already a clear loser: alternative data.
The niche industry has always been under the microscope of clients and regulators alike because of its data-collection methods. A three-year investigation by the Securities and Exchange Commission into the now-renamed data provider App Annie and a subsequent $10 million fine put the industry on notice that its Wild West days were over.
Now, its infighting is threatening sectorwide collateral damage as two of its most-well-known brands take each other to court.
“Trust is going down as the stakes are going up,” D’Amico said, referring to the increased revenues flowing into the industry thanks to an uptick in buyers and prospective datasets.
“My general concern,” he added, “is this brings a lot of instability to the market, for both buyers and sellers.”
The post The trade-secrets fight between 2 of alternative data’s biggest names is getting nasty appeared first on Business Insider.
