NEW YORK (Reuters) -A former quantitative researcher at Two Sigma Investments has been indicted for fraud, after allegedly manipulating the large hedge fund's algorithmic models to generate a $23.5 million payday for himself while causing $165 million of harm to clients, U.S. authorities said on Thursday.

The U.S. Department of Justice said Jian Wu was indicted on wire fraud, securities fraud and money laundering charges.

Wu, 34, a Chinese citizen who has lived in New York, also faces related U.S. Securities and Exchange Commission civil charges, that regulator said.

Prosecutors said Wu is a fugitive. A lawyer for him could not immediately be identified. Two Sigma declined to comment. It fired Wu in 2024, ending six years of employment, and repaid clients for losses, authorities said.

"Wu's employer trusted him to act with integrity," U.S. Attorney Jay Clayton in Manhattan said in a statement. "Instead, Wu used his technical abilities to cheat his employer out of millions."

Two Sigma uses an array of investment models that digest data and make investment predictions, which can be used to make trades.

Founded in 2001, the New York-based firm has more than $60 billion of assets under management.

Authorities said Wu created or helped create 14 models that circumvented Two Sigma's requirement that new models generate unique predictions that complement, rather than duplicate, existing predictions.

Two Sigma allegedly began using Wu's models more frequently, believing them sufficiently different, causing it to deviate from the intended strategies of clients when it bought and sold securities on their behalf.

Authorities said Wu was paid $23.5 million in 2022, and spent some on a multimillion-dollar Manhattan apartment.

They said the scheme began to unravel in 2023 as employees noticed higher-than-expected correlations between Wu's models and other models, and Two Sigma began an investigation.

Wu then made additional unauthorized changes to conceal his prior activity, authorities said.

The SEC said Two Sigma canceled Wu's $8 million of performance grants in 2021 and 2022, but has not recouped his $17.8 million of cash bonuses for those years.

The cases are U.S. v. Wu, U.S. District Court, Southern District of New York, No. 25-cr-00413; and SEC v Wu in the same court, No. 25-07573.