• 17 Feb 2012 at 5:29 PM

Sergey Aleynikov Is Dancing Again

One thing that I may have mentioned here is that, before I was lured to the blogging industry by the outrageous lucre on offer, I worked at this little establishment called Goldman Sachs. One thing that I probably haven’t told you, but that I’ve mentioned to a few friends and co-workers, is that due to some frankly inexplicable confusion, the time between my telling people “I am leaving to go work for Dealbreaker” and my being escorted out of the building by active-duty Navy SEALS was somewhat longer than you might expect (viz. several nanoseconds). One thing that I’ve never told anybody, so let’s keep it between us, is that I made good use of the delay to download certain files to a flash drive. I won’t discuss all the details, since I’m using some of those files to set up my own high-frequency insider trading fund, but I will mention that with the right codes the voice recorders in the GS elevators can be accessed remotely.*

One reason I never told anyone about this before is that Goldman takes it badly when people take stuff with them on the way out, and has a tendency to react by having them imprisoned for the better part of a decade. After today, though, it looks like I’m good to go:

A federal appeals court reversed the conviction late Thursday of Sergey Aleynikov, a former Goldman Sachs programmer found guilty of stealing proprietary code from the bank’s high-frequency trading platform.

The United States Court of Appeals for the Second Circuit overturned the conviction and ordered the trial court to enter a judgment of acquittal. A judgment of acquittal generally bars the government from retrying a defendant.

The reversal was without explanation; it said an opinion would follow “in due course.”

The appeals court ruling came just hours after a three-judge panel heard oral arguments on Mr. Aleynikov’s appeal. Mr. Aleynikov, who was convicted in December 2010, is serving an eight-year sentence at a federal prison in Fort Dix, N.J. …

The reversal deals a major blow to the Justice Department, which has made the prosecution of high-tech crime and intellectual property theft a top priority. This case tested the boundaries of the Economic Espionage Act, a 15-year-old law that makes it a crime to steal trade secrets. Federal prosecutors held up the arrest of Mr. Aleynikov as an example of the government’s crackdown on employees who steal valuable and proprietary information from their employers.

The decision is also a loss for Goldman Sachs, which reported Mr. Aleynikov to federal authorities after it accused him of stealing computer code. The bank had portrayed itself as the victim of a brazen crime.

Turns out, though, that it wasn’t the victim of a brazen crime. It was a victim, I guess, and of a brazen something, I guess, but that something wasn’t a crime. Because whatever it was, wasn’t illegal. So says the Second Circuit Court of Appeals, who should know.

That’s a bit of an interpretation – the actual judgment doesn’t say much – but it’s the only possible one. The oral argument, per DealBook, “centered on whether Goldman’s high frequency trading system was a ‘product produced for interstate commerce’ within the meaning of the law”; the court apparently concluded that it wasn’t. If it wasn’t, then what Aleynikov did wasn’t a crime, so he should get out.

That all sounds super obvious, but it’s actually kind of unusual. Most criminal appeals aren’t “the thing I was accused of wasn’t a crime” – they’re more like “I didn’t do it.” Back before the lucrative blogging business and the sometimes less lucrative investment banking business, I actually worked for a while in the U.S. Court of Appeals business, and I don’t recall my court ever hearing an oral argument in a criminal case, deciding within a few hours that the crime in question was not in fact a crime, and reversing with a judgment of acquittal within a few hours so that the defendant could get out. More typically, after an oral argument the judges would nod gravely and promise to think about it, and issue a decision a respectable month or two or six later. And if that decision does reverse a conviction, it will usually send it back to the trial court to think about it some more and maybe have a new trial. A same-day reversal saying “don’t try him again, just let him out” is pretty uncommon, and suggests that things went rather badly wrong here.

This is likely to be good news for other recent code thieves, as well as for all programmers. But it doesn’t look great for the government or for Goldman. After early signs that the government and Aleynikov would reach a compromise that recognized both that Aleynikov did some shady stuff and that it probably wasn’t criminal, prosecutors ended up getting him thrown in jail for (potentially) eight years for a non-crime. And for Goldman, well, reluctantly but honorably reporting your former employees to the authorities for a real crime seems reasonable. Getting them imprisoned for something that might hurt your bottom line but that turns out not to be illegal can’t be good for morale.**

Court Overturns Conviction of Ex-Goldman Programmer [DealBook]
Ex-Goldman programmer’s conviction overturned [Reuters]
U.S. v. Sergey Aleynikov [2nd Cir.]

* Nah, kidding, this is not me. But since I’ve got you here: a reader emailed recently to ask for my “commentary on the truth (and fallacies) of the GS elevator,” apparently unsatisfied with this semi-debunking that claims “this is no Goldman alum.” I actually disagree – based on some mentions, in the early days of the Twitter feed, of people who are easily identifiable to me but not famous outside of GS, I am sure there is/are one or more current or former GS employee(s) involved and I could guess roughly what office and group at least one of them is in. But it has nothing to do with a damn elevator. It’s just some stuff, that someone says, who works/worked at Goldman. Y’know, like this post. But shorter.

** Some other disclaimers may be in order, such as:
1. Some of this post is not true.
2. Goldman is great, it really is, I have only fond feelings for the firm and in particular would never disparage it within the meaning of any contracts relating to the delivery of my RSUs.
3. But whoever worked to get Aleynikov prosecuted is a dick.
4. Separately, I have an indirect connection to the Aleynikov case, outside of having worked at GS, that might create at least the appearance of a conflict, unlike my usual scrupulously objective and unbiased journalism on this here web site.

16 comments (hidden to protect delicate sensibilities)
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Comments (16)

  1. Posted by What am i missing? | February 17, 2012 at 5:41 PM

    Stealing ISSS legal?

  2. Posted by GGGGGuest | February 17, 2012 at 5:45 PM

    Good tags, Matt. Well done with the creativity on a Friday afternoon.

  3. Posted by What about his legitimate years? | February 17, 2012 at 5:45 PM

    So before beginning an illustrious career designing credit products you had an even more illustrious career being a lawyer who ok-ed credit products first? must have been a big let down after being a clerk at an appeals level court! no wonder you finally burned out and head to take that chance to be a writer. but i bet your federalist society buddies are pretty disappointed.

  4. Posted by Compulsive Quant | February 17, 2012 at 6:23 PM

    "It’s just some stuff, that someone says, who works/worked at Goldman. Y’know, like this post. But shorter."

    So we can go ahead and lump that in with all correspondence ever prepared by anyone who works/worked at Goldman?

    -Guy who actually thinks this post was pretty nice and concise but just couldn't help himself.

  5. Posted by Not an ATL refugee | February 17, 2012 at 7:59 PM

    Great post, though your description of appeals is really the opposite — appeals are based on mistakes in law (this law doesn't apply to me) rather than fact (even if it did, I didn't do it).

  6. Posted by Possible Refugee | February 17, 2012 at 8:39 PM

    I think what Matt was saying (although simplified for the audience) was that it usually is an issue based on the facts of the defendant's case. E.g. "I shot the guy but the cops violated my 4th amendment rights in searching me to get the gun," or "maybe I did offer to sell a large amount of cocaine to that fellow but the wiretap was improperly obtained, etc." This on the other hand is more akin to "the assault weapon I was caught with wasn't an assault weapon, it was a high velocity lead dispersal device which I planned to use in my performance art routine, so NBD."

    -Possible ATL political asylum seeker.

  7. Posted by UFO | February 17, 2012 at 10:37 PM

    "Now listen, Vlad, I'd like your cooperation on this Iran thing without you turning this into some BS about a regional power play. As a token of good will, here's one of your people back. Don't worry about the judgement, I'll get some geeks at Harvard to come up with something. Dad vadana, tovarich"

    – Obama

  8. Posted by Guest | February 18, 2012 at 12:52 AM

    Well at least they disgorged him of all that bonus money they gave him, if that gives GS any consolation.

  9. Posted by jyoung1891 | February 18, 2012 at 8:21 AM

    Good one Matt. Those Humor Pills that you've been taking are starting to work.

  10. Posted by Guest | February 18, 2012 at 12:06 PM

    It is, as long as you call it high frequency trading.

  11. Posted by not a doctor | February 19, 2012 at 10:44 AM

    name checks out. its got the length and girth of an atl post.

    –trust me i'm a doctor

  12. Posted by VonSloneker | February 19, 2012 at 11:47 AM

    Yup, Matty has all the Global Alpha algos ready to rock. ML Capital Partners, coming soon…

  13. Posted by Fund Namer | February 19, 2012 at 2:53 PM

    I highly doubt that Matt's fund would have such a concise name, other than that, no concerns.

  14. Posted by laken group | February 19, 2012 at 5:48 PM

    I think there already is an ML CAP….so furtheinto farce we.descend. Remimds of a client I was workinh on once that called itself, "Fidelity Global".

    It was years ago, and I asked where I should send the email
    confirming agreements etc…


  15. Posted by guest house | February 20, 2012 at 4:54 PM

    That's just, like, your opinion, man

  16. Posted by our website | October 1, 2012 at 9:44 AM

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