US federal prosecutors have charged former Two Sigma quantitative researcher Jian Wu with manipulating trading models to inflate his compensation, in a case that underscores heightened scrutiny on individual quants inside major hedge funds, according to a report by Bloomberg.

Wu, 34, allegedly altered parameters in algorithms between 2021 and 2023 to make them appear more profitable, helping secure a $23m pay package in 2022. Prosecutors say the misconduct ultimately contributed to $170m in client losses. The charges carry a potential 20-year prison sentence.

The SEC filed a parallel civil case, noting that Wu’s actions coincided with longstanding internal control weaknesses at Two Sigma. The firm last year paid $90m in penalties and returned $165m to investors over model-related failures. Wu has denied wrongdoing and argued the losses stemmed from weak oversight and internal dysfunction, citing disputes between Two Sigma’s co-founders.

The case follows similar prosecutions targeting individual quant traders, including a January indictment of a former Headlands Technologies employee for code theft.