CNBC Contributor and Solstein Capital Co-Founder Sued By Hedgeye For Stealing Trade Secrets, Conspiracy and Destroying Evidence

STAMFORD, Conn., Feb. 9, 2022 /PRNewswire/ -- Nadine Terman, Founder and CEO of Solstein Capital and a regular CNBC contributor, together with Solstein Capital itself, have been sued for their alleged roles in a conspiracy to steal confidential information and trade secrets from Hedgeye Risk Management. The lawsuit was filed today in the United States Federal Court for the Southern District of New York.

Hedgeye filed the Complaint against Terman and Solstein after uncovering evidence of the conspiracy, and destruction of evidence to conceal the theft, during the discovery process in a separate lawsuit brought last year against a disgruntled former Hedgeye Managing Director, Darius Dale. Terman is also alleged to have interfered with Dale's employment agreement and caused her firm to breach their contract with Hedgeye.

According to the Complaint:

Terman's hedge fund, Solstein Capital, also named a defendant, subscribed to Hedgeye's institutional research from July 2017 until April 1, 2021. Her firm's subscription included in-depth, high-touch, sophisticated Macro and fundamental stock research. As Solstein's Chief Investment Officer, Terman relied heavily upon Hedgeye and paid the independent financial research firm as much as $140,000 per year.

The Complaint details Terman and Solstein's dependency on Hedgeye, including Terman's decision to hire Hedgeye's former volatility analyst in 2019, despite a mutual non-solicitation clause in its agreement with Hedgeye. Shortly thereafter, Solstein reduced its annual Hedgeye subscription fees by 50%.  

Terman demonstrated a pattern of exploiting her relationship with Hedgeye to misappropriate the firm's intellectual property. After becoming a CNBC contributor in 2020, she was known to use Hedgeye's unique jargon and nomenclature, parrot Hedgeye's market predictions, and reference Hedgeye's research without credit given to Hedgeye.

Seeing an opportunity to end Solstein's reliance on Hedgeye in March of 2021, Terman contacted then-Hedgeye Macro Analyst, Darius Dale. Together, they developed a plan to exploit Hedgeye's intellectual property whereby: 1) Dale would steal Hedgeye's trade secrets 2) Dale's and Terman's partner and co-conspirator Steven Lamar would finance and manage the launch of Dale's competing business, "42 Macro" and 3) The competing business would "sell" virtually identical research to Solstein Capital that Solstein had been buying from Hedgeye.

In his final week at Hedgeye, while in regular contact with Terman, Dale extensively and painstakingly copied Hedgeye's confidential information and trade secrets to his personal Dropbox. Dale and Terman shared access to a Dropbox folder named "42 Macro" that Terman and Solstein Capital used to directly access and acquire Hedgeye's confidential information and trade secrets.

Terman also offered her firm's resources and its employees to help Dale conceal his theft. The day before he resigned, Terman messaged Dale offering to "help you [Dale] ensure Hedgeye cannot access anything from the [company] laptop you are returning." She later emphasized by text, "I just did not want you to trust a Hedgeye IT person."

After using Hedgeye's source files to create the new, competing company's source files, Dale deliberately deleted Hedgeye's source files from his new work computer in an attempt to hide evidence of the misappropriation. Dale has admitted to this destruction of evidence in the federal court trade secret litigation. Dale also has admitted to stealing Hedgeye's key proprietary financial models, client lists with thousands of Hedgeye contacts, and other proprietary and confidential information. 

After copying Hedgeye's proprietary models and tools, then destroying the evidence, Dale emailed Nadine Terman and Steven Lamar confirming that he had taken Hedgeye's intellectual property in the week he resigned, saying of Hedgeye, "they [Hedgeye] don't actually have access to the nowcasts; they're on my hard drive."

Terman, Dale and Lamar launched their competing company, "42 Macro," whose entire business consists of selling research derived from stolen Hedgeye financial models, just days after Dale's resignation. At the same time, Terman ended Solstein's subscription to Hedgeye's research.

"It's shocking how depraved, egregious and immoral the actions of these particular individuals were," said Michael Blum, President of Hedgeye. "Stealing is not acceptable when conducting business in our country, especially in our regulated industry. And destroying evidence to conceal wrongdoing should not be tolerated in the US legal system."

"We will do everything within our power to remedy these wrongs and ensure that justice prevails," he added.

Click here to read the entire Complaint.

ABOUT HEDGEYE RISK MANAGEMENT

Hedgeye Risk Management is an independent investment research and online financial media firm. Focused exclusively on generating and delivering investment ideas in a proven buy-side process, the firm combines quantitative, bottom-up and macro analysis with an emphasis on timing.

The Hedgeye team features some of the world's most regarded research analysts covering Macro, Financials, Healthcare, Retail, Gaming, Lodging & Leisure (GLL), Restaurants, Industrials, Consumer Staples, Cannabis, Communications, China, Housing, Materials, Technology, REITs, and Washington policy analysis.

SOURCE Hedgeye Risk Management