Ex-Goldman Programmer Aleynikov Guilty of Stealing Firm's Software Secrets

Former Goldman Sachs Group Inc. computer programmer Sergey Aleynikov was found guilty of stealing the firm’s trade secrets by appropriating part of a high-frequency computer source code on his last day at work.

Aleynikov went on trial Nov. 29 in federal court in New York on charges of violating the Economic Espionage Act and the Interstate Transportation of Stolen Property Act. He faces as long as 10 years in prison on the espionage charge and five years for the interstate transportation charge.

U.S. District Court judge Denise Cote set sentencing of Aleynikov for March 18. He and his lawyer both declined comment. He will be under home confinement and electronic monitoring, Judge Cote ruled.

Aleynikov, who is a naturalized U.S. citizen, holds dual U.S.-Russian citizenship, his lawyer Kevin Marino said in court.

Cote directed that Aleynikov limit his travel to the Southern and Eastern Districts of New York. Jurors left the courthouse after the verdict and all declined comment.

Cote also ordered that Aleynikov surrender all travel documents and directed that three financially-responsible people come back and sign his bond. He left court accompanied by family members and declined comment.

Photographer: Jin Lee/Bloomberg

Sergey Aleynikov, a former Goldman Sachs Group Inc. computer programmer, leaves federal court in New York. Close

Sergey Aleynikov, a former Goldman Sachs Group Inc. computer programmer, leaves federal... Read More

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Photographer: Jin Lee/Bloomberg

Sergey Aleynikov, a former Goldman Sachs Group Inc. computer programmer, leaves federal court in New York.

Assistant Manhattan U.S. Attorney Rebecca Rohr, in her closing statement on Dec. 9, told jurors that Aleynikov was a “thief.” On his last day of work at New York-based Goldman Sachs in June 2009, Aleynikov uploaded hundreds of thousands of lines of source code from the firm’s trading system, she said.

Circumvented Security System

He circumvented Goldman Sachs’s security system, sent the code to an outside server in Germany, and later compressed and encrypted the code, Rohr said. Aleynikov took the code with him to a meeting with his new employers in Chicago in July 2009, she said.

“He had a cheat sheet -- the codes from Goldman Sachs that he needed to get started with for a trading system” at his new employer, Rohr said. “He wanted to make it seem like he’d written the code himself. He was a programmer who stole the answers to the test.”

After taking Goldman’s software, Aleynikov executed a program to cover his tracks, prosecutors said. If he thought the codes were open source and should be publicly available, “why did he then encrypt it?,” Rohr asked jurors. “So that no one, like him, could access the code,” she said.

While Aleynikov may have broken a confidentiality rule of Goldman Sachs, he didn’t commit a crime, said his attorney, Kevin Marino.

‘Not a Crime’

“He violated the policy, OK, but that’s not a crime,” Marino told jurors. “A crime is when you act to harm the victim and benefit yourself.”

Aleynikov had access to all of Goldman Sachs’s high- frequency trading software and could have easily taken a flash memory drive and copied the entire trading platform, yet he didn’t, Marino said. Aleynikov took open-source code he had written at Goldman Sachs and nothing that was proprietary, he said.

Waving Notebook

Marino called the government’s case “a silly prosecution” as he waved a notebook at prosecutors at the conclusion of his closing arguments.

Aleynikov, who started at Goldman Sachs in May 2007, left his $400,000-a-year job to work for Chicago-based Teza Technologies LLC, which promised him $1.2 million including salary, bonus and profit-sharing.

During the trial, prosecutors presented evidence that, on the night of June 4, 2009, before his last day at Goldman Sachs, Aleynikov transferred hundreds of thousands of lines of computer source code related to the firm’s high-frequency trading business. At about 5:20 p.m. the next day, Aleynikov sent parts of the trading code to a code-storage website in Europe that wasn’t blocked by the firm, witnesses said.

Arrest

When he was arrested Aleynikov told Federal Bureau of Investigation agents that he intended only to copy open source code that wasn’t owned by Goldman Sachs, according to the prosecutors.

Benjamin Goldberg, an associate professor of computer science at New York University, testified during the trial that he compared the trading code taken by Aleynikov with what was publicly available on websites. Goldberg said the source code was either the same as the publically available or Goldman Sachs’s was slightly modified.

Marino, saying Goldman Sachs “wasn’t the New York Yankees of high-frequency trading,” told jurors that prosecutors exaggerated the value of the firm’s high-frequency trading platform.

“Sergey knew what Goldman Sachs owned and that lots of it was open source code,” Marino said.

“If it’s open source code, it’s not Goldman’s just because it happened at Goldman,” he said.

The case is U.S. v. Aleynikov, 1:10-cr-00096, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporters on this story: Patricia Hurtado in New York at pathurtado@bloomberg.net; Bob Van Voris in New York federal court at rvanvoris@bloomberg.net.

To contact the editor responsible for this story: David E. Rovella at drovella@bloomberg.net.

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