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Sergey Aleynikov Goldman Sachs Black Box Heist: computer codes and trading-related files

By Amarendra Bhushan for CEOWORLD Magazine Updated:July 6, 2009

A Russian Sergey Aleynikov suspected by federal authorities of stealing secret computer trading codes from New York-based financial institution Goldman Sachs has been arrested.

The bank uses the secret mathematical formulas in its automated stock and commodities trading business.

Sergey Aleynikov, who worked at Goldman as an IT programmer for two years until last month, uploaded the codes to a German-based Web site.

Matthew Goldstein at Reuters has broken a story about a major brokerage security breach that he believes involves Goldman Sachs’ vaunted trading operation.

“While most in the US were celebrating the 4th of July, a Russian immigrant living in New Jersey was being held on federal charges of stealing top-secret computer trading codes from a major New York-based financial institution — that sources say is none other than Goldman Sachs.

The allegations, if true, are big news because the codes the accused man, Sergey Aleynikov, tried to steal is the secret code to unlocking Goldman’s automated stocks and commodities trading businesses. Federal authorities allege 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 apparently gives Goldman a leg-up over the competition when it comes to rapid-fire trading of stocks and commodities. Federal authorities say the platform quickly processes rapid developments in the markets and uses top secret mathematical formulas to allow the firm to make highly profitable automated trades.”

According to the FBI’s affidavit, the code — 32MBs — was transferred from Aleynikov’s Goldman computer to an unnamed file-hosting service based in Europe just before he resigned from his $400,000-a-year job at the beginning of June.

Promised a job at triple his $400,000 annual salary, he downloaded the secret codes he had developed, presumably on behalf of a generous new employer who is reportedly based in Chicago.

Aleynikov told the cops that he thought he was just accessing “open source” files on which he had worked, and only later realised he had accessed more data than he realised.

FBI affidavit

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Tagged with: Arrest, automated trading, Commentaries, Goldman Sachs, Scandal, Sergey Aleynikov, US Attorney

rodrik

More than likely, he brought someone's IP to them when hired on. How many rockstar software engineers do you know pulling down $400k? I know lots of brilliantly talented SEs and programmers who can't find a job period. And normal pay for an experienced hot commodity programmer is more in the $90-120 range. Manhattan might be 1.5 times that, but even then it's pretty high. Not to even mention the new gig...

Our country's HR doctrines are downright evil, in that "banality of great evil" kind of way.

Brian

I thought a prior conviction would increase your chance of a job at GS. "Proves you have the right stuff" and all.

..... GS hires Wheel of Fortune guy, incorporates random trip to Greece and $50,000 vowel purchases into latent quant trading platforms. I'll buy an F for 500, U for 1000 C for....

Alex

The part I do not quite understand is how some other firm would be able to properly utilize this code. I assume front running involves before the fact knowledge of orders, not detecting after the fact patterns in executed orders.

According to the stats, GS is responsible for 40% of the program trading activity, so it can front run against its own clients. Who else has access to that large a body of order executions? How do the ‘markets’ get manipulated?

So, is this a smoke screen to lock down the code as it will reveal something different about its purposes? Theft of IP shows GS has been harmed and justifies preventive actions - why the need to warn about the possibility of a financial WMD?

http://beaconintegration.com.