SEC Charges Quantitative Model Developer with $165 Million Investment Model Fraud

The U.S. Securities and Exchange Commission (SEC) has charged Jian Wu, a New York resident and former employee of Two Sigma Investments, LP, and its affiliate Two Sigma Advisers, LP, with orchestrating a scheme to defraud his employer and secure millions in illicit compensation.

According to the SEC’s complaint, Wu manipulated at least 14 algorithmic investment models between November 2021 and August 2023—models he created or helped develop to forecast securities performance. Wu allegedly made unauthorized changes that caused the models to mimic existing forecasts, while falsely claiming they produced unique insights.

These changes led Two Sigma to execute trades that deviated from its intended strategies, resulting in approximately $165 million in client losses—funds the firm later reimbursed. Wu is accused of obtaining millions of dollars of ill-gotten gains in incentive compensation through the manipulated models.

The SEC’s complaint, filed in the U.S. District Court for the Southern District of New York, seeks injunctive relief, disgorgement and prejudgment interest, a civil penalty, and an order barring Wu from acting as or being associated with an investment adviser.

In a parallel action, the U.S. Attorney’s Office for the Southern District of New York has announced criminal charges against Wu.

The SEC continues to pursue enforcement actions against financial fraud. In a recent case, it charged Prestige Investment Group, LLC and Paramount Management Group, LLC for orchestrating an ATM Ponzi scheme that defrauded investors of approximately $400 million.