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Citadel just cut a team managing more than $1 billion after an analyst and a data scientist broke internal compliance rules about trading in personal accounts

Citadel just cut a team managing more than $1 billion after an analyst and a data scientist broke internal compliance rules about trading in personal accounts

Ken Griffin

CNBC/ Heidi Gutman

Ken Griffin cut a team managing energy investments in Texas.

  • Analyst Josh Lingsch and data scientist Derek Allums were fired by Citadel after they broke one of the firm's rules for trading in personal accounts, sources tell Business Insider.
  • They were a part of a nine-person team in Texas that was focused on energy investments.
  • The portfolio manager of the team, Jarrad Bourger, was fired because of performance reasons unrelated to the compliance issue, a source close to the firm said.
  • The team managed more than $1 billion, and the portfolio was liquidated after Lingsch and Allums were dismissed.
  • Click here for more BI Prime stories.

Citadel has liquidated a portfolio with more than a billion dollars in energy investments run out of Texas after analyst Josh Lingsch and data scientist Derek Allums were fired from the firm this week for violating the firm's rules around trading in personal accounts.

The team of nine people was the worst-performing team at Citadel this year of the more than 30 portfolio groups in the firm's Global Equities business, a source close to the firm said. Some members of that now-shuttered team have now joined other teams at the firm. Citadel manages a total of $32 billion.

Sources say the team did perform well during the recent oil spike, when the price of crude jumped nearly 20% and hit many hedge funds that had made bearish bets on the commodity.

The precise nature of the two individuals' trading violations in their personal accounts could not be determined, and the firm declined to comment when asked about details of the infractions.

Jarrad Bourger, the portfolio manager for the group, was fired for performance reasons, the same source told Business Insider, but was not involved with the compliance violations.

"Citadel has always had a strong, robust culture of compliance, and we expect all of our employees to act with the highest levels of integrity," a spokesperson for the hedge fund said in a statement.

See more: Ken Griffin's Citadel is losing a longtime money-manager and the COO of its Global Equities business

When Citadel sent out an email to employees about the liquidation of the portfolio and the dismissal of a majority of the team, an email from the compliance department followed shortly after, sources tell Business Insider. The email from compliance was a reminder of rules around trading in personal accounts.

According to his LinkedIn, Lingsch has been with Citadel for almost two years, previously working as an analyst for Arete Investment Group in Austin, Texas, for more than four years. Allums has been with Citadel for less than a year, working previously for Point72 as a research analyst on the healthcare team and as a vice president with the venture capital arm of Steve Cohen's firm. Both did not respond to requests for comment. Bourger could not be reached for comment.

The firm's flagship fund, Wellington, is up 11.2% for the year through the end of August, besting many of the firm's multi-strategy peers. The average hedge fund, according to Hedge Fund Research, is up 7.8% through the first eight months of year.

See more: Humans are beating machines, and Pershing Square and Greenlight are crushing it. Here's how hedge funds performed in the first half.

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