Daniel Michalow was a golden child at D.E. Shaw, the now-$70 billion hedge fund he joined in 2004 at the age of 21, straight out of Harvard. By the end of 2011, he had become the firm’s youngest managing director, or partner, and was co-heading its macro group with a member of the executive committee whom he considered a mentor.
But his world took a sudden turn at the height of the #MeToo movement when Michalow made a sexist comment and left the hedge fund soon after. The events surrounding his departure in 2018 turned him into a self-described “reluctant” litigator against one of the world’s most prestigious hedge funds and what he argues are illegal employment contracts that attempt to strip employees of their statutory and civil rights, keeping them silent about any misdeeds.
Michalow refused to sign those documents and promptly sued the hedge fund in arbitration. The battle has cost D.E. Shaw: Michalow won an industry-record $52 million in a Financial Industry Regulatory Authority defamation arbitration in 2022, plus the hedge fund paid $10 million in a 2023 settlement with the Securities and Exchange Commission based on some issues in its employment contracts. And ongoing legal claims could cost it an additional $14.4 million in what the former hedge fund managing director and partner says is back pay — deferred compensation — that the firm is withholding.
“David Shaw claims to be the moral and progressive hedge fund manager,” Michalow tells Institutional Investor. But he says the hedge fund’s employment contracts, its behavior toward him, and its unwillingness to pay what it owes him “tell a very different story.”
Michalow is currently trying to get the Court of Appeals of New York State to take his case — an uphill battle, as two lower appeals courts have refused to do so, for reasons ranging from questions over the nature of the compensation Michalow claims he is owed to a general reluctance by the courts to challenge arbitration rulings.
Whatever happens next, Michalow is shedding light on some of the employment contracts prevalent in the hedge fund industry, which include noncompetes, nondisclosure agreements, and, in this case, something he calls “release for pay.”
You can read the entire story here:
https://www.institutionalinvestor.com/article/why-former-hedge-fund-partner-still-battling-de-shaw
Michelle Celarier 