Trading codes allegedly stolen from Goldman Sachs Group Inc. (GS) were just one of several instances in which employees of Teza Technologies LLC uploaded code that could have belonged to other firms, Teza's chief technology officer said in testimony Monday.

Testifying in Illinois Chancery Court, Teza's William Sterling said that there were two other cases in which the startup high-frequency trading firm removed codes from its central data repository due to questions around their licensing and nature, including some code written by a former UBS AG (UBS) employee prior to his joining Teza.

"We decided not to use that code," said Sterling, also a former UBS employee who joined Teza in June. "Our goal was to be very conservative."

Sterling testified Monday in a case brought against Teza by Citadel Investment Group LLC, the Chicago-based hedge fund operator that is seeking an injunction against the startup firm headed by two former Citadel employees, Misha Malyshev and Jace Kohlmeier.

Malyshev and Kohlmeier, former members of Citadel's high-frequency trading group, departed in February, and Citadel is pursuing an injunction against both men for violating their non-compete agreements.

Chicago-based Citadel is also seeking $300 million in damages from the defendants.

Teza caught Citadel's attention in July when Sergey Aleynikov, a former Goldman Sachs programmer hired by the startup firm, was arrested by the FBI on charges he stole computer codes from his former employer.

Teza subsequently fired Aleynikov, now facing charges in a Manhattan federal court.

On Monday, Sterling said that after joining Teza, another former UBS employee had uploaded to Teza servers code for the rapid storage and retrieval of market data, which the Teza employee had written while still working for UBS.

However, Sterling said that he didn't believe the code belonged to UBS; it hasn't been turned over to UBS and Sterling said he wasn't aware of any conversations with UBS regarding the code.

Representatives of UBS, which was subpoenaed in the Teza case, were not immediately available for comment.

Since Aleynikov's arrest, Sterling said that the FBI has taken possession of three Teza workstations and one server, though authorities haven't yet told the firm what they have found.

Teza, according to Sterling, never encouraged employees to use any code that could be property of another company, something he said would run counter to the nascent company's culture.

"Anything we use is purely developed in-house," he told Judge Mary K. Rochford Monday.

Sterling added that he takes the issue of coding theft seriously; prior to his leaving UBS he discovered firsthand that another UBS employee had sent a "significant amount" of UBS source code to a personal email address.

Sterling said he reported his discovery to UBS's human resources department.

In March, UBS filed a lawsuit against three former members of its algorithmic trading group who had moved to Jefferies & Co., accusing them of misappropriating trade secrets and violating contractual agreements.

In Citadel's case against Teza, other legal arguments Monday centered on whether Teza was creating trading strategies, which would put Kohlmeier and Malyshev in violation of their non-compete agreements with Citadel.

Like the former Citadel officials, Sterling said that the work being done at Teza amounted to setting up infrastructure - testing software and connectivity tools while evaluating connections to exchanges

While Sterling said that Teza has developed some programs that could be used for quantitative trading, these were "only a small part of what is necessary to do those things," and the likelihood of Teza's trading operation being operational by a Dec. 1 start date was "not realistic at this point."

The case will continue Tuesday.

-By Jacob Bunge, Dow Jones Newswires; 312-750-4135; jacob.bunge@dowjones.com