by Bill Singer
Federal Jury Finds Former Goldman Sachs Programmer Aleynikov Guilty. Faces 15 Years in Prison.
February 18, 2010
Goldman Sachs' high-frequency trading system generates millions of dollars in annual profits for the firm. Obtained in 1999 as part of Goldman's $500 million acquisition of Hull Trading Company, the high-frequency trading system has since been modified and maintained, and Goldman Sachs took significant measures to protect the confidentiality of the system's computer programs (including firewalls to limit access to the firm's computer network, and limiting internal access to the high-frequency trading program). Several measures were taken to protect the system's source code, including requiring all Goldman Sachs employees to agree to a confidentiality agreement.
From May 2007 to June 2009, Sergey Aleynikov was employed at Goldman Sachs as a computer programmer responsible for developing computer programs supporting the firm's high-frequency trading on various commodities and equities markets. In April 2009, Aleynikov resigned from Goldman Sachs and accepted a job at Teza Technologies ("Teza"), a newly-formed company in Chicago, Illinois. Aleynikov was hired to develop Teza's own version of a computer platform that would allow Teza to engage in high-frequency trading.
Beginning at approximately 5:20 p.m. on June 5, 2009, Aleynikov's last day at Goldman Sachs, he transferred substantial portions of Goldman Sachs's proprietary computer code for its trading platform to an outside computer server in Germany (all of which was accomplished while working at his desk at Goldman Sachs). Without informing Goldman Sachs, Aleynikov encrypted the files and transferred them over the Internet. After transferring the files, he deleted the program he used to encrypt the files and deleted his computer's "bash history," which records the most recent commands executed on his computer.
Throughout his employment at Goldman Sachs, Aleynikov transferred (without Goldman Sachs' authorization) thousands of computer code files related to the firm's proprietary trading program from the firm's computers to his home computers. He accomplished these transfers by e-mailing the code files from his Goldman Sachs e-mail account to his personal e-mail account, and storing versions of the code files on his home computers, laptop computer, a flash drive, and other storage devices.
On July 2, 2009, Aleynikov flew to Chicago, Illinois, to attend meetings at Teza's offices, bringing with him his laptop computer and another storage device, each of which contained Goldman Sachs's proprietary source code. Aleynikov was arrested on July 3, 2009, as he arrived at Newark Airport following that visit.
On February 11, 2010, the United States Attorney for the Southern District of New York announced a three-count indictment of forty-year-old Aleynikov (the counts carry a 25-year maximum sentence):
- theft of trade secrets,
- transportation of stolen property in foreign commerce, and
- unauthorized computer access.
After a two-week trial before U. S. District Judge Denise L. Cote, on December 10, 2010, Aleynikov was found guilty by a jury in Manhattan federal court of one count of theft of trade secrets and one count of transportation of stolen property in interstate and foreign commerce. 40-year-old Aleynikov faces a maximum of 15 years in prison. He is scheduled to be sentenced on March 18, 2011.