- Wealth PMS (50L+)
on Friday, one Sergey Aleynikov was arrested at Newark airport by FBI agents, as he was coming back from a trip to Chicago (maybe visiting his new employer), on what are basically industrial espionage charges. Sergey, or Serge as his Linked-In account identifies him, was VP of equity strategy over at 85 Broad (or maybe 1 New York Plaza, his detailed Bloomberg Bio page has disappeared) had the following responsibilities at Goldman Sachs according to Linked-In:
• Lead development of a distributed real-time co-located high-frequency trading (HFT) platform ..
In the 5 days immediately preceeding his departure from “Financial Institution” (potentially GS), Sergey allegedly downloaded 32 megs of ultra top-secret quant trading proprietary code, that, according to Special Agent McSwain’s affidavit, he then proceeded to encrypt and upload to a website in Germany, with a UK owner. One can only imagine the value of this “code” not only to Goldman but to the highest bidder. After all, from the affidavit: “certain features of the [code], such as speed and efficiency by which it obtains and processes market data, gives the Financial Institution a competitive advantage among other firms that also engage in high-volume automated trading.The Financial Institution further believes that, if competing firms were to obtain the [code] and use its features, the Financial Institution’s ability to profit from the [code]’s speed and efficiency would be significantly diminished.” Needless to say, many others are now also likely hot on the trail of the code.
To those that don’t think ZH is a worthy source, the NY Times has it as well. (HT: Anil Shenoy)
A quick recap: Programmer at Goldman’s High Frequency Quant trading division decides to quit for 3x his salary, and transfers source code out of the US. 32 megs of it. They figure it out but take a month to do so, and have him arrested. Now, the code’s been out there for a month, presumably looking for a buyer. It’s likely someone already knows about it – and despite Goldman’s “security” claims, it could have been a potential [failed] buyer that raised the alarm.
If it’s true, it might be a volatile time for the high freq trading programs in the US. (In India, the high freq traders are all human. You should see the speed they can type orders.)