Postscript: After a longer version of this article first appeared, Sergey Aleynikov was 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.
This case 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. 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. Hence, the second trial. The problem with the trial 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 prosecutors more interested in who stole computer software that can be used to rip-off honest investors than in who designed 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?
Exactly what does the computer code that Aleynikov stole from Goldman do that would allow it “manipulate the market in unfair ways”? Let’s see the smoking gun.