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Ex-IBM Employee from China Arrested in U.S. for Code Theft

Ex-IBM Employee from China Arrested in U.S. for Code Theft

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A former software engineer for IBM Corp in China has been arrested by U.S. authorities for allegedly stealing proprietary source code from his former employer, prosecutors announced on Tuesday.

Jiaqiang Xu, 29, was charged in a criminal complaint filed in federal court in White Plains, New York, with one count of theft of a trade secret, as prosecutors accused him of trying to sell the stolen code to other companies.

He was arrested on Monday after meeting with an undercover officer at a White Plains hotel, where authorities said he was recorded saying he used the code to make software to sell to customers.

"Theft of trade secrets of the type alleged against Xu drains the lifeblood of innovation and competition, and is rightly a serious federal crime," Manhattan U.S. Attorney Preet Bharara said in a statement.

IBM was not identified by name in the complaint. But a LinkedIn profile for Xu said he was employed as a system software developer at IBM during the period in question.

An IBM spokesman declined comment.

Prosecutors said the source code at issue was related to proprietary software the company developed for a clustered file system, which facilitates faster computer performance.

Xu, who began working at IBM in China in 2010, had full access to the source code before voluntarily resigning in May 2014, prosecutors said.

According to the complaint, the Federal Bureau of Investigation in 2014 received a report that someone in China was claiming to have access to the code and using it for business ventures.

An undercover law enforcement officer posing as an investor seeking to start a data storage company subsequently contacted Xu, the complaint said.

In March, Xu, after earlier sending the purported investor his resume, emailed the officer and another undercover agent about his past experience with the proprietary software and attached some sample code from his prior job.

Xu later told one of the undercover officers he was willing to consider providing his company the code to allow it to develop its own data storage system, prosecutors said.

After Xu offered to remotely install the proprietary software, the FBI in August arranged for a computer network to be set up to his specifications to do so. Files uploaded to it contained a functioning copy of the software, prosecutors said.

The case is U.S. v. Xu, U.S. District Court, Southern District of New York, No. 15-mj-4388.

(Reporting by Nate Raymond in New York; Editing by Tom Brown)

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