Ex-Goldman Programmer Freed After Theft Conviction Thrown Out

A former Goldman Sachs Group Inc. (GS) computer programmer was freed after his conviction for stealing the bank’s high-speed trading code was reversed by a U.S. appeals court.

Wearing a grey sweatsuit, white tennis shoes and a huge grin, Sergey Aleynikov, 42, left the Manhattan courthouse where he had been convicted in December 2010 and entered a waiting car with his lawyer, Kevin Marino.

“Justice occasionally works,” Aleynikov told reporters as he left. “This was such big news to me I haven’t had any time to think about what would happen.”

Aleynikov, a naturalized U.S. citizen born in Russia, said he hoped to be with his three daughters, ages 8, 6 and 3. Until yesterday, he had been serving an eight-year sentence at the federal prison in Fort Dix, New Jersey.

“I’m very grateful to my mother and my aunt who supported me from Russia, and my friends who stood by me and believed in my innocence,” he said. “One lesson you learn is to really start valuing your life, day-to-day is a victory.”

After hearing oral arguments from both prosecutors and Marino on Feb. 16, the U.S. Court of Appeals in Manhattan issued a one-page order vacating Aleynikov’s convictions for economic espionage and the interstate transportation of stolen property. The appeals court said it would issue an opinion explaining the ruling later.

Photographer: Jin Lee/Bloomberg

Sergey Aleynikov, the former Goldman Sachs Group Inc. computer programmer found guilty of espionage for stealing the firm’s code for high-frequency trading, had his conviction overturned by a federal appeals court in New York. Close

Sergey Aleynikov, the former Goldman Sachs Group Inc. computer programmer found guilty... Read More

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Photographer: Jin Lee/Bloomberg

Sergey Aleynikov, the former Goldman Sachs Group Inc. computer programmer found guilty of espionage for stealing the firm’s code for high-frequency trading, had his conviction overturned by a federal appeals court in New York.

‘We Won’

“Kevin e-mailed me at 6 a.m.,” Aleynikov said as he left the courthouse. “I woke up at 5:30 a.m. and I read it five times. The words were, ‘We won.’”

The appeals court also issued a mandate that would have foreclosed any further challenge to its decision. The office of Manhattan U.S. Attorney Preet Bharara persuaded the court to set aside the mandate so it can argue for a rehearing of the appeal, either before a three-judge panel or all the court’s available judges. Ellen Davis, a spokeswoman for Bharara’s office, declined to comment on the ruling.

Marino said he was confident the appeals court’s decision would stand.

“It’s over now,” said Marino, of Marino, Tortorella & Boyle PC in Chatham, New Jersey. “We’re on firm ground. This was a wrongheaded prosecution that should never have been brought.”

Source Code

U.S. District Judge Denise Cote, who presided over the trial, ordered Aleynikov released from prison this morning. After a brief hearing this afternoon with prosecutors, Aleynikov and his lawyers, she agreed to release him on his own recognizance.

Aleynikov was convicted by a jury in December 2010 of violating the Economic Espionage Act and the Interstate Transportation of Stolen Property Act. He was sentenced last March.

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 high-frequency trading system, prosecutors said.

He circumvented Goldman Sachs’s security, sent the code to a server in Germany, compressed and encrypted it, and took it with him to a meeting with new employers in Chicago, the U.S. said. Prosecutors argued Aleynikov wanted it as a “cheat sheet” to start a trading system at his new job.

Espionage Act

During oral arguments on Feb. 16, the three-judge appeals panel criticized the government’s application of the espionage act to Aleynikov’s actions, asking the prosecutor how the crime occurred and how it affected commerce.

The judges -- Dennis Jacobs, 67, Guido Calabresi, 79, and Rosemary Pooler, 73 -- also asked if taking Goldman Sachs’s trading code was comparable to taking copyrighted material or bringing an employee manual to a new job.

Marino argued that the trial judge had “bent over backward” to let the government apply the espionage statute and argued the case should have been prosecuted in state court.

Marino argued, as he had during the trial, that Aleynikov only took open-source code he had written at Goldman Sachs. He said the government had tried to expand its reading of the Economic Espionage Act to encompass that.

“There is no trade secret,” Marino told the court. “He took it to make his new job easier, he never intended to harm Goldman.”

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

To contact the reporter on this story: Patricia Hurtado in New York at pathurtado@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.

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