Wedbush lawsuit says ex-employees took secrets to Liquidnet

Wedbush Securities Inc. sued two former employees and trading platform Liquidnet Holdings Inc., accusing them of taking customer lists, documents and disclosures from the firm.

The suit accuses New York-based Liquidnet, used by institutional investors to buy and sell large blocks of shares, and the former employees, Louis Kerner and Michael Silverstein, of working together to take proprietary information from Wedbush to start the same business at Liquidnet.

Liquidnet said Monday that it had hired Kerner to run a new group focused on private companies. Wedbush filed the lawsuit Thursday in New York State Supreme Court in Manhattan.

“Kerner, Silverstein and Liquidnet engaged, and continue to engage, in the premeditated taking and misappropriation of certain of Wedbush’s most valuable trade secret and confidential and proprietary information,” Wedbush said in the complaint.

Liquidnet received the lawsuit and is reviewing it closely, said Melissa Kanter, a spokeswoman for the company. She declined to comment further on the complaint.

Kerner began working for Los Angeles-based Wedbush in its New York office in April 2010 and had been managing director of its Private Shares Group since March; Silverstein began working in Wedbush’s Los Angeles office in February and had been reporting to Kerner and others since April, Wedbush said in the complaint.

Kerner called a Wedbush managing director on Oct. 16 and told him that he and Silverstein would be joining a competitor the next day, Wedbush said in the complaint. The managing director, Cyrus Pirasteh, reminded Kerner of his confidentiality obligations, and Kerner replied that the Private Shares Group’s clients belonged to him and that Wedbush could speak to his lawyers if the firm had “a problem with that,” according to the complaint.

The complaint accuses the defendants of forwarding entire customer data sets to personal e-mail accounts and changing passwords to keep Wedbush out of its own databases. Kerner and Silverstein are also accused of personally soliciting at least two other Wedbush employees to leave the firm and not returning company property including laptop computers.