Scandal at Goldman Sachs

a1bion · Post by **a1bion** » Mon Jul 06, 2009 3:32 pm

From reading what went down, this guy didn't just try to steal GS's program trading code--he stole it for real. Think about it. He already had a job lined with a different outfit up paying him three times as much as what he was making. He uploaded the code to a site in Germany, owned by someone in London.

By Matthew Goldstein

NEW YORK, July 5 (Reuters) - Did someone try to steal Goldman Sachs' secret sauce?

While most in the United States were celebrating the Fourth of July holiday, a Russian immigrant living in New Jersey was being held on federal charges of stealing secret computer trading codes from a major New York-based financial institution.

Authorities did not identify the firm, but sources say the institution is none other than Goldman Sachs (GS.N).

The charges, if proven, are significant because the codes that the accused, Sergey Aleynikov, tried to steal are the secret sauce to Goldman's automated stock and commodities trading business.

Federal authorities contend the computer codes and related-trading files that Aleynikov uploaded to a German-based website help this major financial institution generate millions of dollars in profits each year.

The platform is one of the things that gives Goldman an advantage over the competition when it comes to the rapid-fire trading of stocks and commodities. Federal authorities say the platform quickly processes rapid developments in the markets and using secret mathematical formulas, allows the firm to make highly-profitable automated trades.

The criminal case has the potential to shed a light on the inner workings of an important profit center for Goldman and other Wall Street firms. The charges also raise serious questions about the safeguards that Wall Street firms deploy to protect these costly-to-build proprietary trading systems.

The criminal case began to unfold on the evening of July 3, when Aleynikov was arrested by FBI agents at Newark Airport after returning from Chicago.

Aleynikov apparently had just started a job with another big firm in Chicago after leaving his previous employer in New York in early June. It appears that the financial institution allegedly victimized by Aleynikov had alerted federal authorities that its former employee might be up to no good.

On July 4, Aleynikov was processed on a "theft of trade secrets charge" in a criminal complaint. As of Sunday morning, he was still being held at the Metropolitan Correction Center in Brooklyn.

A Goldman spokesman declined to comment on the incident. A spokeswoman for the United States Attorney's Office in Manhattan did not comment.

(...)

The biographical information for Aleynikov on LinkedIn says he joined Goldman in May 2007 and was vice president for equity strategy. The bio says he was responsible for "development of a distributed real-time co-located high-frequency trading platform."

The case against Aleynikov may explain why the New York Stock Exchange moved quickly last week to stop reporting program stock trading for its most active firms.

Goldman was often at the top of the chart -- far ahead of its competitors. It's possible Goldman had asked the NYSE to stop reporting the number after it discovered that someone may have infiltrated the proprietary computer codes it uses.

http://www.reuters.com/article/companyNewsAndPR/idUSN0518022220090706?pageNumber=1&virtualBrandChannel=0&sp=true

MinGator · Post by **MinGator** » Mon Jul 06, 2009 4:30 pm

cat's outta the bag now, huh?

annarborgator · Post by **annarborgator** » Mon Jul 06, 2009 4:50 pm

I love the quickness with which the FBI acts in protecting Government Sachs. LOL. Cracks me up.

And I agree with you a1...I think he definitely actually stole it...IMO, this is why NYSE changed their reporting of principal SLP trading recently...I betcha Goldman asked them to not report their shit anymore after this went down...

annarborgator · Post by **annarborgator** » Mon Jul 06, 2009 8:34 pm

And at least Goldman now admits that it is fully capable of manipulating the markets:

“The bank has raised the possibility that there is a danger that somebody who knew how to use this program could use it to manipulate markets in unfair ways,” Facciponti said, according to a recording of the hearing made public today. “The copy in Germany is still out there, and we at this time do not know who else has access to it.”

http://www.bloomberg.com/apps/news?pid=20601087&sid=ajIMch.ErnD4

radbag · Post by **radbag** » Mon Jul 06, 2009 10:12 pm

manipulate THEIR markets is how i read that.

annarborgator · Post by **annarborgator** » Mon Jul 06, 2009 10:12 pm

so the markets belong to Goldman?

radbag · Post by **radbag** » Mon Jul 06, 2009 10:17 pm

the markets that they are participating in...yes...just like i want to make a market in door stoppers...that's my market assuming i'm the most aggressive buyer and the most cheapest offer.

annarborgator · Post by **annarborgator** » Mon Jul 06, 2009 10:29 pm

What's good for the goose is good for the gander, IMO....if goldman didn't want people to have this power they shouldn't have created...cost of doing business when your business is playing God.

radbag · Post by **radbag** » Tue Jul 07, 2009 5:19 pm

Fair enough

Which is why they're appealing to the right jurisdictions to bring the dude to justice. GS as far as I can tell are behaving appropriately and going by the book in other words. No ones hiring jason bourne to eliminate the problem is what I'm saying

annarborgator · Post by **annarborgator** » Tue Jul 07, 2009 7:35 pm

Werd.

I just love the fact that market manipulation is fair when GS does it but seemingly unfair when others do it.

annarborgator · Post by **annarborgator** » Fri Jul 10, 2009 11:57 am

http://www.youtube.com/watch?v=lrlQSMCx-aE#

radbag · Post by **radbag** » Fri Jul 10, 2009 6:07 pm

The loud whisperings in mens rooms at all the county clubs these days are suggestions that the reason why GS is so concerned about the theft is because the material that was stolen MAY have hard evidence proving GS has cheated.....couldn't happen to a nicer bunch

annarborgator · Post by **annarborgator** » Fri Jul 10, 2009 6:36 pm

I've wondered that same thing myself, rad. The thing is...wouldn't they try to handle it secretly without getting the gubbmint involved if that were the case? I guess they may be hoping that if they can make Sergey look like a bad enough guy then that will deflect the shitstorm? I dunno.

Hell, even if they get caught frontrunning or cheating in some other way, they will just pay their slap-on-the-wrist fine and move along, doing the same shit as before.

radbag · Post by **radbag** » Sat Jul 11, 2009 12:10 am

..................it's why i'm super surprised that this kid didn't get found dead in a river somewhere.

annarborgator · Post by **annarborgator** » Sat Jul 11, 2009 12:26 am

Muffuckin' werd.

MinGator · Post by **MinGator** » Mon Jul 13, 2009 9:36 am

This is starting to sound more and more like the diversion that is covering something else that's going on.