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Was market-rigging computer program Goldman's or U.S. government's?

Section: Daily Dispatches

9:10p ET Friday, March 18, 2011

Dear Friend of GATA and Gold:

As The New York Times reported today in the story appended here, the computer programmer who got caught stealing Goldman Sachs' computer code for market-rigging operations has been sentenced by a federal judge to an astonishing eight years in prison. The most telling detail about the case may be, as the Times reports seemingly without awareness, the speed with which federal agents acted against the code theft. In early June 2009, the Times reports, the programmer copied the code from the Goldman Sachs computer system to a computer system in Germany. On July 2, 2009, the programmer delivered the code to his new employer in Chicago. He was arrested by six FBI agents the following day at the airport in Newark, New Jersey. The investigation was wrapped up within a month, perhaps in less than three weeks. Would the theft of computer programming from any other company (OK, except maybe JPMorgan Chase) be pursued so vigorously by the federal government when Osama bin Laden and dozens of murderers, bank robbers, and rapists remain on the loose? And was the government really obliging Goldman Sachs here, or was it taking care of itself, the market-rigging computer program really being part of a government operation, considered a matter of national security, like another market-rigging operation, the gold price suppression scheme?

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

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Ex-Goldman Programmer Gets Jail Term of 8 Years for Code Theft

By Azam Ahmed
The New York Times
Friday, March 18, 2011

A former Goldman Sachs computer programmer convicted of stealing source code from the firm was sentenced on Friday to more than eight years in prison, capping a case that had shone a rare spotlight on the world of lightning-fast computer-driven trading.

A federal jury in Manhattan in December found the programmer, Sergey Aleynikov, guilty of stealing proprietary code that places trades using computer algorithms that spot tiny discrepancies in stock prices. Such trading earned Goldman about $300 million in 2009.

Before leaving Goldman for a new job at a start-up, Teza Technologies, federal prosecutors had claimed, Mr. Aleynikov secreted the code onto a server in Germany to get around the investment bank's security systems.


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The prison term, while at the low end of federal sentencing guidelines, was four times what probation officials had recommended. Prosecutors had asked for as much as 10 years.

Both the defense and the prosecution cited the recent case in Manhattan of Samarth Agrawal, a trader at Societe Generale, who was convicted of stealing proprietary code from its high-frequency trading business. Mr. Agrawal was sentenced in February to three years in prison, less than the government’s request.

"It is unprecedented for the government to seek a sentence five times as high as probation recommends and for the court to impose a sentence four times as high," said a defense attorney, Kevin H. Marino.

Standing before the judge in a navy-blue jail uniform on Friday, Mr. Aleynikov, 41, maintained that what he did was a foolish breach of confidentiality, not a theft meant to benefit his new employer.

"I never meant to cause Goldman any harm," the Russian-born Mr. Aleynikov said in a heavy accent. "I am sorry for the burden and emotional impact this trial has caused on my family, and my mother and children."

But Judge Denise L. Cote of the Federal District Court in Manhattan likened his crime to "economic espionage."

Mr. Aleynikov's conduct, she said, "deserves a significant sentence because the scope of his theft was audacious -- motivated solely by greed, and it was characterized by supreme disloyalty to his employer."

"He knew what he was doing would harm Goldman Sachs," the judge said.

Mr. Aleynikov came to the United States from Russia in 1990, just before the fall of the Soviet Union. He spoke little English and, according to his lawyer, had just $300 in his pocket and an expertise in computer programming. Goldman paid him $400,000 a year to write code for its high-frequency trading business, making him one of the bank's highest-paid programmers.

In 2009 he was recruited by Teza Technologies, which offered to triple his salary. During his last three days before departing Goldman in early June of that year, he secreted large pieces of the code onto a server in Germany, and then deleted some of the evidence to hide what he had done, prosecutors had said.

On July 2, 2009, Mr. Aleynikov visited the offices of Teza, bringing with him a computer and storage device that contained some of the Goldman code. The following evening, six agents from the Federal Bureau of Investigation arrested Mr. Aleynikov after he landed at Newark International Airport.

Mr. Aleynikov has been in jail since March 2, when the judge revoked his bail. The decision to incarcerate Mr. Aleynikov before his sentencing was prompted by a letter from federal prosecutors, who warned that Mr. Aleynikov had dual citizenship and posed a flight risk.

After the sentencing, his lawyer, Mr. Marino, asked the judge if his client could be placed on bail and be allowed to surrender himself when it came time to report to prison. When the prosecution protested, Mr. Marino called their objections "mean-spirited."

"OK, I don't think it's mean-spirited," said Judge Cote, who denied the motion but agreed to reconsider at a later date. The judge recommended to the Federal Bureau of Prisons that Mr. Aleynikov be assigned to a federal prison in New Jersey.

Before he was taken from the courtroom, Mr. Aleynikov blew kisses to his family in attendance.

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Prophecy Resource Spins Off Platinum/Palladium Venture:
World-Class PGM Deposit in Yukon

Company Press Release, January 18, 2011

VANCOUVER, British Columbia -- Prophecy Resource Corp. (TSX-V:PCY)and Pacific Coast Nickel Corp. announce that they have agreed that PCNC will acquire Prophecy's Nickel PGM projects by issuing common shares to Prophecy.

PCNC will acquire the Wellgreen PGM Ni-Cu and Lynn Lake nickel projects in the Yukon Territory and Manitoba respectively by issuing up to 550 million common shares of PCNC to Prophecy. PCNC has 55.7 million shares outstanding.

Following the transaction:

-- Prophecy will own approximately 90 percent of PCNC.

-- PCNC will consolidate its share capital on a 10 old for one new basis.

-- Prophecy will change its name to Prophecy Coal Corp. and PCNC will be renamed Prophecy Platinum Corp.

-- Prophecy intends to distribute half of its PCNC shares to shareholders pro-rata in accordance with their holdings.

Based on the closing price of the common shares of PCNC on January 17, $0.195 per share, the gross value of the transaction is $107,250,000.

For the complete announcement, please visit: