Lawyers for start-up high-frequency trading firm Teza Technologies LLC on Friday charged that a legal case being brought by Citadel Investment Group LLC is not about enforcing noncompete agreements, but aimed at sending a message to those who dare to leave the giant hedge-fund firm.

Chicago-based Citadel has alleged that former employees Mikhail "Misha" Malyshev and Jace Kohlmeier violated their noncompete agreements after leaving in February and subsequently founding Teza, but Teza attorney Christopher Gair said on Friday there is no evidence that the start-up firm can compete yet.

"This is about a $15 billion hedge fund that brought an army of lawyers to bear on two guys who chose to leave Citadel," said Gair, in closing arguments Friday before a Chicago court.

An injunction sought by Citadel to shut down Teza's operations for nine months would be a "mortal blow" to the company and its employees, according to Gair.

Teza's defense hinges on the argument that its founders and their employees were developing technological infrastructure to support high-frequency trading, but the firm was not yet developing trading strategies, or "alphas" - a key component of the business that would let Teza trade and put the nascent firm in competition with Citadel, violating the nine-month noncompete agreements binding Malyshev and Kohlmeier.

"We have not begun work on alphas, and alphas are the core of the business," Gair said. "Infrastructure is not the core of this business."

Malyshev and Kohlmeier were key figures in Citadel's high-frequency trading group, and helped expand it into a unit that earned $1 billion in 2008, even as the company's flagship hedge funds lost 55% amid the global financial turmoil.

High-frequency trading, driven by computer programs, seeks profits through rapid-fire transactions across multiple exchanges and trading venues. It has helped banks and proprietary trading firms make healthy returns as the broader market struggles.

Teza didn't catch Citadel's attention until the early July arrest of Sergey Aleynikov, a former computer programmer with Goldman Sachs Group Inc. (GS) who has been charged with stealing code from the Wall Street bank. Aleynikov had left Goldman to join Teza, which subsequently fired him.

Citadel lawyer Brian Sieve earlier Friday called on Judge Mary Rochford to temporarily shut down Teza, which he termed a "pirate ship of illegal activity," on grounds that Malyshev and Kohlmeier sought to poach Citadel employees and develop competing high-frequency trading strategies, while keeping their activities secret from their former employer.

Sieve also alleged Friday that Malyshev committed perjury, with the Teza founder first saying in an affidavit that he did not delete computer files covered by a July document preservation order, before admitting in later testimony that he did after panicking about pornography contained in his computer.

Gair acknowledged that Malyshev didn't tell the truth on that matter, but called it a "distraction from real issues of the case."

Closing arguments are expected to conclude Friday.

In separate arbitration proceedings, Citadel is pursuing $300 million worth of damages from each of the defendants, along with $100 million from a former Citadel lawyer now serving as Teza's general counsel.

-By Jacob Bunge, Dow Jones Newswires; 312-750-4117