ALEYNIKOV’S SECOND CONVICTION HAS BEEN OVERTURNED – NOW WHAT?

Maybe the government or the SEC can now tell us exactly what the “stolen” computer code does that would allow it to “manipulate the market in unfair ways.”

This case and the previous one on the same charges had at its heart “software that could be used to manipulate the market in unfair ways.”

Sergey Aleynikov, a computer programmer, was accused of stealing Goldman Sach’s computer code when he left the company in July 2009.  Somehow, Goldman got the FBI to arrest Mr. Aleynikov within 48 hours after they realized he had stolen their software algorithms.  Such a feat is impossible for mere mortals, but not for Goldman.  It took longer for hundreds of law enforcement officers to find two felons who broke out of a prison in upstate New York.  Even more impressive is how the FBI and the prosecutors have jealously guarded the purloined proprietary code as if it was Fort Knox.

At the time, prosecutors said that the stolen software could be used to “manipulate the market in unfair ways”?  If that’s the case, exactly what was Goldman doing with the software in the first place?  And why is the government protecting the software instead of examining it to determine how it could be used to manipulate the market?

After Aleynikov was convicted in his first trial and spent a year in prison, his federal conviction was overturned on appeal.  New York State decided to try him again.  Aleynikov was again convicted on May 1, 2015 of stealing confidential computer trading code from Goldman Sachs, but he was found not guilty of illegally duplicating computer-related material.  He appealed the second conviction and it too was overturned.

The problem with both trials is neither the defendant nor what he did or did not do.  The more pertinent issue is what he allegedly stole.  Many market observers have tuned into this case because they are convinced that our markets have been overtaken by fraudulent high frequency trading.

During Aleynikov’s first trial, the government prosecutors asked the judge to close the doors on the public when sensitive details of high frequency trading were discussed during the trial.  This tells you all you need to know about how far the government will go to protect the interests of Goldman and, by extension, other Wall Street firms. 

Why are government prosecutors more interested in who may have stolen computer software, which can be used to rip-off honest investors, than in the company that directed its staff to develop the software and may have actually used it?  Isn’t it more important to determine whether the stolen software was ever used to bilk investors?  If it was, who benefited from its use?  Why is computer code that can be used in such a nefarious way considered proprietary?

Exactly what does the computer code that Aleynikov allegedly stole from Goldman do that would allow it “manipulate the market in unfair ways”?  Can it be used to front-run or pump-and-dump honest investors using high-frequency manipulative algorithms?  If prosecutors won’t tell us, why doesn’t the Securities and Exchange Commission tell us? After all, the SEC is the market watchdog that is supposed to protect investors and maintain fair and orderly markets. It’s been six years since Goldman’s computer software was recovered by the FBI and we still don’t know what the infamous software does.  

Let’s see the smoking gun.

LV

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