Zongzong (Nicole) Tao has filed a lawsuit against her former employer, Simplex Investments, LLC, alleging discrimination based on gender and race/national origin, in violation of Title VII and the Illinois Human Rights Act. Simplex is a proprietary trading firm that employs algorithmic high frequency trading strategies to make profits from trading futures and equity options. In 2015, Chinese-American trader Nicole Tao joined Simplex Investments, where she was responsible for monitoring trading strategies, including the Spread Auction Trader (SAT).

Tao claims she experienced a hostile work environment characterized by aggressive behavior from the Head of Trading, Matt Zimmerman, and a pervasive “fraternity-like” atmosphere. Her responsibilities included monitoring trading strategies, notably the Spread Auction Trader (SAT). Simplex asserts that Tao’s termination resulted from her failure to adequately monitor the SAT’s performance.

Plaintiff retained Zachary Ziliak to review and analyze the processes and procedures for the development and improvement of automated trading strategies, and “Simplex’s claimed basis for terminating [Tao’s] employment.” Ziliak, currently a lawyer, previously worked as a trader and financial engineer.

Simplex Investments sought to exclude Ziliak’s expert testimony, claiming: he is unqualified to opine about how to properly operate and manage a high-frequency trading firm in the years 2020-2021; his retrospective analysis of the company’s decision to terminate Tao’s employment was irrelevant; his methodology is unreliable; and he has improperly presented his own narrative of the facts of the case under the guise of expert opinion.

Algorithmic Trading Expert Witness

Zachary Ziliak, a Rhodes Scholar with six college and graduate degrees enjoyed a successful career in math, finance, and trading before becoming an attorney. He completed graduate work in mathematics at the University of Oxford and obtained a finance and strategy focused MBA from the University of Chicago.

Ziliak worked as a “quant” at UBS, a leading global investment bank, pricing exotic derivatives and forecasting volatility. He then took over as head trader at Matlock Capital, designing and implementing an automated option-trading system.

Get the full story on challenges to Zachary Ziliak’s expert opinions and testimony with an in-depth Challenge Study.

Discussion by the Court

Ziliak reviewed Simplex’s internal documents regarding its trading strategies, including the Spread Auction Trader, and deposition testimony.

Based on his background and review of the documents, Ziliak ultimately concluded that:

“The Spread Auction Trader strategy coding error was not Tao’s fault; that the SAT strategy’s operational behavior in the period from August 2020 to January 2021 would have given Tao no cause to discover or diagnose the error given shortcomings in Simplex’s code and control practices; that the SAT strategy error was inadvertently detected by a developer when implementing unrelated functionality requested by Tao; and that Simplex’s claimed estimate of the dollar impact of the SAT error is imprecise and misleading.”

Ziliak’s Opinion is Not Relevant to Plaintiff’s Discrimination Claims

Plaintiff must establish a prima facie case of discrimination by showing that (1) she belongs to a protected class; (2) she met her employer’s legitimate expectations; (3) she suffered an adverse employment action; and (4) another similarly situated employee outside of her protected class received better treatment from the employer.

In Robertson v. Dep’t of Health Servs., 949 F.3d 371, 378 (7th Cir. 2020), the Seventh Circuit explained that “in determining whether the employer’s reason can be characterized as pretextual, we do not evaluate whether the employer’s proffered justification was accurate or even whether it was unfair. Our sole focus is on whether the employer’s stated reason can be characterized as a falsehood rather than an honestly held belief.”

Plaintiff sought to use Ziliak’s expert testimony to establish that Simplex’s explanation for Tao’s termination—her alleged SAT strategy coding error (among other performance issues)—was a pretext for discrimination. Ziliak’s opinion aimed to demonstrate that the coding error was not attributable to Tao. The Court, however, determined that the central inquiry in a discrimination case is whether Simplex sincerely believed it had a legitimate, non-discriminatory basis for the termination. Ziliak’s opinion, which focused solely on disputing Simplex’s assessment of Tao’s fault, was deemed irrelevant to proving pretext under Title VII and, therefore, was excluded.

Held

The Court granted the Defendant’s motion to exclude the opinion of Zachary Ziliak.

Key Takeaway:

In determining whether an employer’s stated reason for an adverse employment action is pretextual (a cover-up for discrimination), courts do not assess the accuracy, fairness, or even the reasonableness of the employer’s justification. Instead, the sole focus is on whether the employer’s stated reason is a lie or a falsehood, rather than an honestly held belief, regardless of the correctness or desirability of reasons offered for employment decisions. After all, the Court’s role is not to judge the wisdom of management decisions, but to ascertain whether the employer’s description of its reasons is honest.

Case Details:

Case Caption:	Nicole Tao v. Simplex Investments LLC
Docket Number:	1:22cv1463
Court:	United States District Court, Illinois Northern
Order Date:	March 17, 2025

Category: Algorithmic Trading Expert Witness

Algorithmic Trading Expert’s Opinion is Irrelevant to Establishing Pretext under Title VII

Algorithmic Trading Expert’s Opinion is Irrelevant to Establishing Pretext under Title VII