In Second Trial, Ex-Goldman Sachs Programmer Convicted of Code Theft

Ars Technica reports that A former Goldman Sachs programmer—featured in the book Flash Boys—was convicted on Friday for stealing high-speed trading code from the bank. Sergey Aleynikov, 45, was also acquitted on one count of unlawful duplication, according to Reuters. The New York state jury could not come to a verdict on another count of unlawful use of secret scientific material. Sergey Aleynikov was also acquitted of unlawful duplication. This was the second trial for Aleynikov in five years. He could face up to four years in prison.

Comments

Unlawful duplication

[HairyNevus]

Sergey Aleynikov, 45, was also acquitted on one count of unlawful duplication, according to Reuters. [...]. Sergey Aleynikov was also acquitted of unlawful duplication.

Meanwhile, timothy is still at large....

'Stealing'

[Anonymous Coward]

Stealing? So he REMOVED it from them with intent to deny them the use of it? Surely you mean copying? "Unlawful use of secret scientific material." wow, America is full of comedy laws.

Goldman Sacs secret sauce is that when it can't sell bad assets, the ex Goldman Sacs execs in Federal Reserve banks, print money to bail it out. Setting up shell companies that buy the bankrupt assets at high value prices, lending those shell companies printed money, then closing *those* shell companies as bankrupt slowly over time and putting that on the banks books as a loss. Basically handing wealth from real dollar asset companies to Goldmans. Stock trading by its nature is a zero sum game and can't generate wealth without this kind of trickery.

NOW THAT *IS* STEALING. Because it takes wealth away from dollar savers and gives the underlying value to Goldman Sachs.

Re:'Stealing'

[Capt.Albatross]

You are not the only person here to make a case against the conviction on the basis of the meaning of 'stealing', but such arguments don't get anywhere, as the law contains precise definition of what the word is intended to mean in this case (if it actually says 'stealing', which I doubt.) A more pertinent question might be how a matter that should fall under civil / contract law has been turned into a criminal offense.

On the other hand, your characterization of Goldman Sachs' behavior is spot-on.

Re:'Stealing'

[LMariachi]

The district attorney charged Mr. Aleynikov with the unlawful use of secret scientific material and duplication of computer-related material, both felonies under New York State law.

The overturned Federal verdict was on charges of theft, but the state charges did not involve the word.

give it up

[YesIAmAScript]

Stealing/theft is a word with multiple meanings. This is one of them.

http://en.wikipedia.org/wiki/T...

Re:give it up

[DrLang21]

The example of theft of service is a stretch for this case. In all of the examples given on Wikipedia for theft of service, real resources were consumed in a manner that is not replacable. In the case of copying data, the most you suggest is that he was stealing his own time on the clock. But there is absolutely no precedent to allow for that.

Re:give it up

[Greyfox]

I ran across a great quote the other day.

Re:give it up

[Paradise Pete]

Why the desperation to declare that infringement == stealing? The only reason I can see is to invoke the connotation that stealing has. "Infringement" doesn't sound strong enough, so you want to call it something that does.
You're playing word games. "Theft of service" has a specific meaning, in much the same way that infringement does. But you want snip out the "theft" part and treat as a stand-alone word, so that you can then equate it to stealing. Then you want to tie that back to infringement.. It's a parlor game. Start with any word, then take a reasonable synonym for it. Now find a synonym for the new word. Continue to repeat this game and you can "prove" that black is white.

Re:give it up

[dbIII]

We could also just as accurately say that Goldman Sachs stole the Greek economy among many other things.
I suppose it could always be argued that the Greek government didn't have to follow their advice, and that "sharp practice" is the American way that they should have been wary of - but it isn't what is supposed to be the American way is it?
It's the same with proposing to jail a copyright infringer for longer than a rapist or armed robber - something to be ashamed of. Just because Goldman Sachs execs like to act and think like the English nobility of the 1700s and splash money around to get mere elected representatives to do their bidding is no reason to treat those they see as their enemies as worse than the enemies of society that actually deserve to be locked up (murderers etc).

Re:give it up

[ultranova]

Stealing/theft is a word with multiple meanings. This is one of them.

Theft is a word with a single meaning which various business interests like to use in cases which don't involve it to set up an appeal to emotion. Such attempts should be resisted, not excused.

Re:give it up

[Anonymous Coward]

And here we see a perfect example of multiple fallacies.
The most obvious one would be the strawman. Applying the Scotsman without the parent first taking this step.
The other one would be appeal to authority. Through corruption the law has been changed to treat ideas as if they could be truly stolen, why should dictionaries be held as a higher authority than the law?
And the last and least obvious, the fallacy fallacy. Finding a fallacy can invalidate the argument, it doesn't need to, and even if the argument is invalid it doesn' mean that the conclusion is incorrect.

Re:give it up

[TsuruchiBrian]

When you jump the turnstile in a subway, you are taking up room in a potentially crowded train and lowering the quality of service for paying customers. You are consuming resources without paying for them. That is still the same concept as theft of a physical object. Copying is different than stealing in that no additional resources are consumed.

Re:give it up

[Your.Master]

I think you'll find that "intent to deprive" is not part of all people's intuitive definitions of theft, even if it is involved in many legal statutes. I know it took me a while to be convinced that there were people for whom the intuitive definition did require intent to deprive.

"He stole my idea!" is a common phrase, for instance, and widely understood. That's usually stated by the person who is *not* the entrenched business.

I think this semantic argument about "stealing" and "theft" is a weird bleed-through from the pushback against the highly publicised and absurd RIAA lawsuits against filesharers. I bet if this basic incident had happened 20 years ago there'd be no significant objection to calling it stealing.

Re:give it up

[rtb61]

Face, the target should be thankful, that a major corporate political player is not claiming the defendant murdered the data and should be executed. Clearly they feel infringed upon and are using their control of the US department of in-Justice to persecute the individual. I am surprised they did not go the espionage route if the code just appears in another country.

Re:give it up

[unrtst]

For those not wanting to watch a video to read a quote:

Thomas Jefferson (to Isaac McPherson, 1813-08-13):

If nature has made any one thing less susceptible than all others of exclusive property, it is the action of the thinking power called an idea, which an individual may exclusively possess as long as he keeps it to himself; but the moment it is divulged, it forces itself into the possession of every one, and the receiver cannot dispossess himself of it. Its peculiar character, too, is that no one possesses the less, because every other possesses the whole of it. He who receives an idea from me, receives instruction himself without lessening mine; as he who lights his taper at mine, receives light without darkening me.

Full text is easy to find via your favorite search engine.

Re:It's not really about the code...

[randalware]

lets stop high frequency trading.

stock investments that are fleeting, are not investments only gambling.

People hold investments for days,weeks,months, years.

Gamblers change their mind moment to moment.

Speculators & gamblers gaming our financial systems are making a mess of the world.

This includes the US government and the printing of money without any backing value.

The doom and gloom market boys are predicting a real mess if our leadership doesn't make a real change in regard to our debit & deficit.

got your gold, guns, ammo & prepper supplies ?

How it works

[Required Snark]

Wall Street gets to steal from everybody.

Nobody gets to steal from Wall Street

Re:How it works

[Beeftopia]

That's why Aleynikov has been hounded for the past several years and no banking executives have been criminally prosecuted for their role in causing the biggest financial disaster since the Great Depression.

That's why a single trader is being held for causing the flash crash, doing things that the big companies do, but making the mistake of not having political connections.

This is not about fair market competition. This is about winning at all costs, with the referees (politicians) are paid off by the wealthy players.

Double jeopardy ?

[Saffaya]

Isn't there a law that forbids being trialed more than once for the same events ?

https://en.wikipedia.org/wiki/...

Would someone be informative enough to explain why he couldn't benefit from it ?

Re:Double jeopardy ?

[stephanruby]

Isn't there a law that forbids being trialed more than once for the same events ?

Yes, there is. In fact, his lawyer is going to appeal invoking double jeopardy.

That being said, it looks like that law may not favor him because:

Once again, however, the law is not as simple as it first appears because the statute has an important exception if the earlier case was “terminated by a court order expressly founded upon insufficiency of evidence to establish some element of such offense which is not an element of the other offense, defined by the laws of this state.” Roughly translated, that means Mr. Aleynikov probably can be prosecuted again because the federal case focused on tangible property, while the New York charges cover computer programs.

There is a good chance the latest charges will move forward, which makes Mr. Aleynikov’s demand that Goldman pay his legal fees all the more important because the earlier case essentially bankrupted him. According to a complaint filed in the United States District Court in New Jersey, he claims that the legal fees for the federal case were approximately $2.4 million, and the state case is likely to run up a similar bill.

source

By the way, here is another weird tidbit about the case:

It seems a bit odd that someone accused of stealing from his employer can demand that it pay for his lawyer, but that is how the law operates for public companies like Goldman that agree to indemnify their employees for legal fees and make advance payments of those costs.

Goldman’s bylaws require it to indemnify an officer for all costs in any proceeding, including a criminal prosecution. As a vice president at Goldman, Mr. Aleynikov appears to come within the scope of the bylaws that entitle him to seek payment of his fees.

The bylaws commit Goldman to pay Mr. Aleynikov’s fees in advance of a resolution of the case as long as he agrees to repay the money if it is determined he is not entitled to it, which he has done.

Fabrice Tourre, who is on leave as a vice president, is having many of his legal expenses covered by Goldman as he faces a securities fraud lawsuit by the Securities and Exchange Commission. Goldman also paid a portion of the legal fees of its former director, Rajat Gupta, to defend him against insider trading charges, even though he was accused (and later convicted) of passing confidential information received from the firm.

Even better for Mr. Aleynikov is a provision of Delaware law, the state in which Goldman is incorporated, that requires a company to pay the legal fees of an officer who “has been successful on the merits or otherwise in defense of any action, suit or proceeding.”

When the appeals court reversed the conviction and ordered a dismissal of the charges, he was successful, even though the court also noted at one point that “Aleynikov stole purely intangible property embodied in a purely intangible format.”

That does not mean Goldman will pay the $2.4 million or advance additional money anytime soon, however. Companies loathe this type of claim because it makes them responsible for costs when they consider themselves the victim of a crime, and so there is an incentive to litigate the claim. Given Mr. Aleynikov’s dire financial condition, the firm could try to stall the case in the hope that he will settle for a smaller payment.

source

Re:Double jeopardy ?

[Capt.Albatross]

Thank you for your highly informative comment about Goldman Sachs indemnifying its employees for legal fees.

It seems that Goldman Sachs may be hoist by its own petard here, if the intent behind this provision was, at least in part, to enable 'aggressive' behavior by its officers and employees (i.e. to flirt with arguably illegal behavior).

Re:Double jeopardy ?

[mrchaotica]

Apparently, Mr. Aleynikov's real mistake is that his behavior wasn't profitably illegal...

Re:Double jeopardy ?

[stephanruby]

It seems that Goldman Sachs may be hoist by its own petard here, if the intent behind this provision was, at least in part, to enable 'aggressive' behavior by its officers and employees (i.e. to flirt with arguably illegal behavior).

Plus it also means that if one day you're accused of doing something illegal on behalf of Goldman Sachs, it means you better select the lawyer Goldman Sachs chooses for you, and you better not name any co-conspirator, or make your employer look bad in any way, because they will most likely stop paying for your legal bills if you do.

Re:It's not really about the code...

[MillionthMonkey]

I used to work at a large company that specialized in "e-trading". They paid a fee for access to second order quotes, which meant that they knew about not just the current price of a security, but the actual stream of bid and ask prices from individual investors. If you have access to the stream, you can just write code that slightly underbids and offers slightly overpriced shares, so you get to nickel and dime investors all day with sub-millisecond accuracy. It was basically software that stole money from everyone all day.

Re:It's not really about the code...

[pitchpipe]

I think this verdict sends a great message: do not steal from the leaches of society that have enough money to get other leaches elected.

High frequency scam artists.

[Anonymous Coward]

I find it incredible that the people doing high frequency trading, allowing it, getting kickbacks for allowing it, feeding the output of their crappy algorithms back into the market are not all in prison. If some people of insider knowledge of trades before every one else and trade on that knowledge surely it is a crime. The regulators, the bodies that run the exchanges and the banks are all participating in this mad scam.

Re:It's not really about the code...

[dcollins117]

I think this verdict sends a great message: do not steal from the leaches of society that have enough money to get other leaches elected.

From the comments on this article I get the feeling I'm the only one would read Flash boys. He was developing code, part of it proprietary and part of it open source, which he modified. His intent was to someday separate and release the modified open source code; he didn't have any plans to do anything with the proprietary code. He checked the code into a subversion repository based in Germany, apparently the first free code repository his search engine ranked.

So when the police got hold of this, they heard subversion" repository and concluded obviously this guy is a "subversive". Oh, it's hosted in Germany? Even worse.

When they investigated further, they made a big deal out of the fact that he deleted his bash history. What's he trying to hide? Sounds like a cover up.

That's the level of stupidity and ignorance and we've come to expect of police regarding technical matters. And for what it's worth, I use subversion, (or cvs, git, whatever the project uses) and my .bash_history links to /dev/null. I don't use the feature, so I don't waste the disk space. I guess that makes me a criminal.

Goldman Sachs and possible GPL Violations?

[DougPaulson]

What stealing, he took copies of Open Source he had incorporated into the app while he was employed at Goldman Sachs. By rights Goldman Sachs should be charged with possible GPL Violations.

"Serge quickly discovered, to his surprise, that Goldman had a one-way relationship with open source. They took huge amounts of free software off the Web, but they did not return it after he had modified it, even when his modifications were very slight and of general rather than financial use." ref

Lawyer for Ex-Goldman Programmer Criticizes Prosecutors and Firm

Re:Goldman Sachs and possible GPL Violations?

[timmyf2371]

Considering the guy has been convicted of "unlawful duplication", it sounds like Goldman Sachs did not distribute the software in question. They are therefore entitled to incorporate GPL'd code into their software without making the rest of their code public.

Re: Goldman Sachs and possible GPL Violations?

[dknj]

The distribution clause in the GPL has not been upheld in court.

Re:Goldman Sachs and possible GPL Violations?

[Antique Geekmeister]

Why would the EFF be involved? They're not "the protectors of all technology", there has to be someone whose rights they'd be defending. That would be the owner of the open source, or possibly free software, copyrights. And given that the first case the EFF ever helped litigate was against the US Secret Service, and that the lawyer involved is still there, I think they'd be willing to take on Goldman Sachs if needed.

Unfortunately, none of the copyrights or of open source or 'copylefts' of "free as in speech" software require returning your modifications to the world at large. You _only_ have to provide them, if asked, to the client you wrote them for or provide binaries for, and that requirement applies only to "free software", not to most "open source". The open source licenses generally _deliberately_ allow you to proprietize your personal version of the software, and do not require you to publish changes, precisely so that the "business model" of providing your own secret enhancements can continue. This is the core of a great many open source projects funding, including Citrix Xen, Zmanda, and Sun Microsystems before Oracle bought them.

This one way relationship with free software is extremely common, especially in the financial software community. I and my colleagues are considered fairly odd because we publish our patches, and send them upstream to the code authors. We sometimes have real difficulty negotiating IP clauses in contracts with others because they do not understand, or profoundly fear, the practice. And the difficulty is not with the engineers doing the work. It's with their own lawyers, frightened of providing any information which could be used as any kind of leverage at all in any other case, and their managers, who argue that if they are not _compelled_ to, why should they provide this assistance to competitors?

My team tries to sell it on the basis of supportability. If they patches and improvements get published upstream, other eyes can enhance it, they don't have to maintain and keep spending resources to maintain their own in-house fork, and upsream changes are much less likely to become incompatible with their in-house changes. Then, if necessary, we point out examples, ideally with software they're already using. But it wastes a lot of early setup time getting this negotiated.

Re:Goldman Sachs and possible GPL Violations?

[martin-boundary]

It's not stealing [ethically]. It's exactly what the GPL intends.

Goldman in this case are an end-user. As an end-user, they have certain rights to run the code, and modify it as they wish for their own purposes.

The GPL philosophy has always been to skew the copy rights towards users and away from distributors. If you're purely a user, there are practically no restrictions for you. If you're also a distributor, then some restrictions apply to you.

Re:Goldman Sachs and possible GPL Violations?

[martin-boundary]

That's incorrect. Stealing (or not) depends on whether you are given permission to take something from the owner. The key issue is permission, not quantity nor offering something in exchange.

Re:It's not really about the code...

[bkmoore]

Now, if i could write a software, that took 1 cent of each transaction and put it on my back account...

You mean fractions of a cent, kinda like in Superman 3.

Re:It's not really about the code...

[jbmartin6]

Why wouldn't someone just write a program to slightly underbid and slightly overprice from your company's stream of bid and ask prices, then they could "steal" money from your company all day?

Actually may be stealing in the deprived sense too

[perpenso]

Stealing? So he REMOVED it from them with intent to deny them the use of it? Surely you mean copying? "Unlawful use of secret scientific material." wow, America is full of comedy laws.

It may actually be stealing in the sense of depriving someone too. The code supposedly included trade secrets. Trade secrets are no longer valid once disclosed. The disclosure does not have to be intentional, my understanding is that accidental, negligent, etc disclosure counts too. So if the trade secrets were lost through the source code being copied then the owner was deprived of their trade secrets and theft would have occurred.

"secret scientific material" is probably a pseudonym for trade secrets. Sorry, but if so then the charge is quite reasonable. Trade secrets are intellectual property just like copyrights.

Re:It's not really about the code...

[martin-boundary]

From your comment, I get the feeling you read Flashboys *uncritically*, though.

Open source isn't the issue. The issue is that, as a programmer for hire, the code he produced during his employment period was not under his own copyright. Any working computer programmer knows this, or if not, should.

He had no right to copy the code he wrote, submit patches, or otherwise contribute back to any open source projects. He needed permission from the company's officers to do any of this.

In particular, he probably even broke the open source licenses for the free software he used. For example, the GPL makes it clear that if you patch the software publicly, you *must* have the right to do so. He clearly had no such right.

All open source projects have licenses. All closed source projects have licenses. Just because you can download some source files or some binaries from somewhere, and someone says it's ok to use it, or you think someone said to someone else it's ok to use it, doesn't make it so.

When you're a programmer for hire, you have no rights to your own code. You're there to write it for the company. It's the company's code. It's their property, and their decision, if it gets shared to anyone. It's also their decision if you can use any software inhouse. And it's their decision if they want to abide by any license terms or not.

You're just a codemonkey.(*)

(*) for most values of "you" where "you" is not a company officer.

The Greek Government (re:give it up)

[Capt.Albatross]

Perhaps this is getting off-topic, but the Greek government hired Goldman Sachs precisely because it wanted to adopt 'sharp practices' in hiding its growing economic crisis.

Re:The Greek Government (re:give it up)

[dbIII]

Fair enough, but this current situation looks analogous to the Mafia calling in the cops because an accountant was taking a bit on the side.

Re:It's not really about the code...

[Applehu Akbar]

If Goldman Sachs were gambling, that wouldn't be so bad. They could and often do lose. What high-frequency trading is all about is arbitrage, buying low in one market and simultaneously selling higher in another. Traditional arbitrage is basically a good thing: it's the natural mechanism by which prices in two widely separated trading markets are pulled into line. HFT is arbitraging the tiny price differentials that develop in close-by markets when any small differential between the price of a Microsoft share on one exchange vs. the price on another exchange. The moral problem with HFT is that it is a totally nonproductive financial activity. No industries are being evaluated, no company finances are being vetted and no investments are being made, while a great deal of computer power is getting wasted trying to find infinitesimally faster ways of comparing prices in different markets.

it's all code

[globaljustin]

Open source isn't the issue. The issue is that, as a programmer for hire, the code he produced during his employment period was not under his own copyright. Any working computer programmer knows this, or if not, should.

that is the issue, i'm glad at least a few people are talking about it

it's not as simple as you make it out to be at all, however

if i have a modified version of a standard codebase that i use as a template on many jobs, if someone used then modified that template for a client, by your logic that template itself would be the company's copyright, because it was used

it's the "modified" part that is causing the problem...it's virtually impossible to do not modify code when...um...coding...

there has to be a rational limit...i don't know the specifics of the case, maybe you do...i'm interested to hear what you think the limit of the application of your principle would be in daily work

Re:it's all code

[Cederic]

if i have a modified version of a standard codebase that i use as a template on many jobs, if someone used then modified that template for a client, by your logic that template itself would be the company's copyright, because it was used

If someone used then modified the template then either their changes become your property, or they contravene the licence terms, or they get to keep their changes but not the template or the template is already the company's property.

There's no single answer, until or unless we know the terms of the licence or commercial agreement under which the company are using the code in your template.

Re:it's all code

[martin-boundary]

if i have a modified version of a standard codebase that i use as a template on many jobs, if someone used then modified that template for a client, by your logic that template itself would be the company's copyright, because it was used

Is the standard codebase yours? (ie, have you got the copyright for all of it?)

If the codebase is yours, and you've written the template yourself, then the terms of your contract with the client specify if they own the code or not. It's up to you to be careful what you sign.

If the codebase is not yours, only the template is your work, then the terms of the codebase's license determine if the template you wrote belongs to you or not. If it does belong to you, then the terms of your contract with the client determine if they own your work or you keep ownership of it. If you also deliver the codebase that you do not own as part of the contract with your client, then your contract must not be in contradiction with the codebase's license. If it is, then by delivering the codebase to your client you have broken the contract.

In short, it is your responsibility to follow all the licenses which apply to you, and you should not unknowingly give away rights to your work to others, unless you want to.

Re:It's not really about the code...

[globaljustin]

just write a program to slightly underbid and slightly overprice from your company's stream of bid and ask prices

yeah, that's what caused the "flash crash"...to many people doing exactly what you suggest

it became a tech war...who can have the fastest shortcut?

on other /. threads some commenters examined the code that Goldman-Sachs used as reported in the lawsuit and it was deemed "spaghetti"

it was all a hacked together mess...**at one of the top places**

Re:Thinking . . . High Speed Trading Code

[aXis100]

Stuff minutes. Make it hours or even a whole day. Anything less is speculation.

The stock market should be promoting real investment - i.e you do some research and have an educated opinion that a company will do well. You buy shares, wait for the returns and then sell when things have stabilised. That process takes time - months or years even.

Re:Actually may be stealing in the deprived sense

[perpenso]

The owner was not deprived of the trade secrets. The owner still has all the information. It's just not secret anymore.

Its not that simple. The legal and property protections offered by a trade secret, a legally recognized type of intellectual property, is lost. The owner deprived of its benefits.

Let's say I buy a Ford F series truck. It's "America's best selling car". Now lets say a Toyota model gains the title. Was an "America's best selling car" stolen from me?

That is a title not a trade secret. Again a trade secret is a legally defined type of intellectual property that offers the owner specific legal rights and privileges. For example something in the process that Ford uses to manufacture those trucks. A Ford employee could not take that process to Toyota.

Re:It's not really about the code...

[LMariachi]

I'm having trouble understanding how this wasn't double jeopardy. He was convicted in federal court, served a bit of time, then that conviction was overturned, then the New York D.A. brought state charges against him for the same act.

Re:Actually may be stealing in the deprived sense

[TsuruchiBrian]

Its not that simple. The legal and property protections offered by a trade secret, a legally recognized type of intellectual property, is lost. The owner deprived of its benefits.

Obviously the owner is deprived of the benefits of a trade secret once it is no longer secret. All I am saying is that this benefit was not stolen.

That is a title not a trade secret. Again a trade secret is a legally defined type of intellectual property that offers the owner specific legal rights and privileges. For example something in the process that Ford uses to manufacture those trucks. A Ford employee could not take that process to Toyota.

I am not arguing that the title of "America's best selling car" and a trade secret are legally equivalent. I am saying that they are logically analogous. A person may derive great pleasure form owning "America's best selling car", and if it ceases to be so, that person is deprived of that benefit. Whether that person is legally entitled to those benefits or not is another matter.