(Bloomberg) — Two Sigma Investments’ billionaire founders are headed to another round of arbitration, the latest front in what seems to be intractable infighting at the quant trading giant.
The $80 billion hedge fund revealed the two disputes in a letter to investors seen by Bloomberg. One, initiated by co-founder David Siegel’s family, centers on the resolution of a complaint brought by an ex-employee, while another concerns the future of the firm’s management.
In the first, which was sent to arbitration on Aug. 17, the Siegel parties claim that co-founder John Overdeck improperly handled an earlier dispute, in which an ex-employee sought deferred compensation two years after their exit.
According to the description in the letter, Siegel’s family entities say Overdeck “had undisclosed professional and financial conflicts of interest with respect to the former employee’s claims in the proceeding” and Carter Lyons, the co-CEO chosen by Overdeck, didn’t authorize Two Sigma to bring counter claims against the former employee.
“The arbitration claims that such actions in each case breached fiduciary duties owed to the owners of Two Sigma,” according to the Aug. 21 memo, which said Lyons and Overdeck have yet to respond to the claims.
A representative for the firm declined to comment.
The other fight is an escalation of a conflict that’s been brewing for months, after Siegel’s first pick to share the CEO role resigned. Siegel replaced him on the firm’s two-person management committee with Seth Platt, but whether Platt then automatically becomes co-CEO alongside Lyons remains in dispute.
On Aug. 18, Platt filed a demand for arbitration to resolve the stalemate, the memo said.
Overdeck and Siegel, who founded Two Sigma in 2001 and built it into a quantitative investing behemoth, have been feuding for years. Their relationship has steadily eroded over the last decade, prompting some senior staff and investors to depart.
In an attempt to separate their personal beef from the operations of the firm, the two in 2024 agreed to step down from the two-person management committee, each appointing his replacement.
Shortly afterward, Overdeck initiated arbitration against Siegel over the compensation of certain senior investment professionals. Then Siegel filed a counterclaim accusing Overdeck of mishandling governance.
Then Overdeck returned to the management committee, bumping Lyons, who continued to serve as co-CEO. A year later, Scott Hoffman, who was Siegel’s pick, resigned, citing “ongoing governance challenges,” and Siegel replaced him with Platt.
Two Sigma told investors last week that the proceedings don’t assert claims against the firm or any fund or investment vehicle, and will take time to resolve.
In the letter, the firm also attempted to distance itself from the very public battle between Overdeck and his estranged wife Laura Overdeck. As part of their divorce, she is seeking 35% of the value of his stake in Two Sigma, which she says is worth about $6.2 billion. His lawyers contend his share isn’t a marital asset because the firm was founded nearly two years before the couple married.
“We recognized that recent media attention has extended to John Overdeck’s divorce trial, and we expect it to continue,” the firm wrote in the letter sent by Two Sigma’s investor relations department. “This is a personal matter and we are not a party to those proceedings.”
–With assistance from Sridhar Natarajan.
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