Sergey Aleynikov

Sergey Aleynikov is a former Goldman Sachs computer programmer. He emigrated from Russia to the US in 1990. In December 2010 he was convicted of two counts of theft of trade secrets and sentenced to 97 months in prison. In February 2012 his conviction was overturned by the United States Court of Appeals for the Second Circuit that entered a judgement of acquittal, reversing the decision of the District court.

Career

Sergey Aleynikov immigrated to the United States in 1990. From December 1998 to April 2007, he served as the director of Routing R&D division of IDT Corporation.^[1]

He authored a telecommunications patent^[2] and contributed to a number of open source Erlang projects.^[3] He also published several CPAN modules.^[4]

Aleynikov was employed for two years, from May 2007 to June 2009, at Goldman at a salary of $400,000.^[1] He left Goldman to join Teza Technologies, a competing trading firm which offered to triple his pay.^[5]

In May 2010, Aleynikov founded Omnibius, LLC, a consulting services firm for financial clients.^[1]

Arrest, trial and acquittal

On July 3, 2009, he was arrested by FBI agents at Newark Liberty International Airport after Goldman raised the alarm over a suspected security breach. He was accused by the FBI of improperly copying computer source code that performs "sophisticated, high-speed and high-volume trades on various stock and commodity markets", as described by Goldman. The events leading to his arrest are covered by Michael Lewis in his 2014 book Flash Boys.^[6] According to Assistant United States Attorney Joseph Facciponti, "the bank has raised the possibility that there is a danger that somebody who knew how to use this program could use it to manipulate markets in unfair ways."^[7] Aleynikov acknowledged downloading some source code, but maintained that his intent was to collect open-source code. As this is a common practice among programmers, this is notoriously difficult to prove.

In June 2010, Aleynikov filed a motion in the Federal Court to dismiss the indictment for failure to state a claim. He argued that the acts he was accused of didn't constitute a crime. The Federal Judge Denise Cote dismissed one charge against him but denied the rest of the motion.

In December 2010 Aleynikov had a jury trial in the United States District Court for the Southern District of New York, where the courtroom was sealed to public access several times. On December 10, he was convicted of the two counts of theft of trade secrets and transportation of stolen property.^[5] Later he was sentenced to 97 months (8 years) in prison, three years of supervised release following his prison sentence, and a $12,500 fine, despite the recommendation of the Federal Probation Service of suggesting a 24 month (2 years) sentence.^[8]

Three weeks before sentencing, Aleynikov was incarcerated on request of the government, as he was judged to be more of a flight risk after separating from his wife.^[9]

In March 2011, Aleynikov appealed the conviction, asking the Second Circuit to review the District Court's decision denying his original motion to dismiss the indictment for failure to state a claim.^[10]

On February 16, 2012, the United States Court of Appeals for the Second Circuit heard oral argument on his appeal and, later that same day, unanimously ordered his conviction reversed and a judgment of acquittal entered, with opinion to follow.^[11] Aleynikov was released from custody the next day.

On April 11, 2012, Dennis Jacobs, Chief Judge of the United States Court of Appeals, published a unanimous decision in a written opinion^[11] stating:

On appeal, Aleynikov argues, inter alia, that his conduct did not constitute an offense under either statute. He argues that: [1] the source code was not a "stolen" "good" within the meaning of the NSPA, and [2] the source code was not “related to or included in a product that is produced for or placed in interstate or foreign commerce” within the meaning of the EEA. We agree, and reverse the judgment of the district court.^[10]

In the course of these events, Aleynikov has spent 11 months in prison. Aleynikov has divorced, lost his savings,^[12] and, according to his lawyer, "[his] life has been all but ruined".^[13]

The government did not seek reconsideration of the Second Circuit's ruling, thus ending federal action against Aleynikov.^[14]

Later, on December 18, 2012, the law was changed by Congress, in order to punish acts like the ones Aleynikov committed in future rulings, in a law referred to as the "Theft of trade secrets clarification act of 2012".^[15]

New charges by the state of New York

On August 9, 2012, Aleynikov was re-arrested and charged by Manhattan District Attorney Cyrus Vance, Jr.^[16] on behalf of New York state, with the offenses of "unlawful use of secret scientific material" and "unlawful duplication of computer related material"^[17] based on the same conduct. The state prosecution was initiated based on a signed complaint by the same federal agent, McSwain, who led the investigation of the failed federal prosecution. Aleynikov's lawyer, Kevin Marino, accused Goldman Sachs of being behind the government's aggressive prosecution of Aleynikov, and he sharply criticized the Manhattan District Attorney's office for charging Aleynikov after his federal conviction had been overturned and he had already served a year in prison.^[18]

On September 27, 2012, Aleynikov pled not guilty to both state charges^[19] and rejected the prosecutors' plea offer of accepting a single count offense and serving no jail time. On April 5, 2013, Aleynikov lost his motion to dismiss based on double jeopardy. In rendering the decision, New York State Supreme Court Justice Ronald Zweibel stated that Aleynikov's acquittal in federal court only precluded the federal government from retrying Aleynikov. The state of New York, as a separate sovereign, could continue pursuing charges against Aleynikov.^[20]

On June 20, 2014, upon reviewing the evidence, Justice Ronald Zweibel published a 71-page opinion in which the court ruled that F.B.I. “did not have probable cause to arrest defendant, let alone search him or his home.” The arrest was “illegal,” and Mr. Aleynikov’s “Fourth Amendment rights were violated as a result of a mistake of law.”^[21] Besides finding that he was arrested illegally without probable cause, the court blocked the majority of evidence passed by the F.B.I. to prosecutors at the NY State DA's office, as that property was supposed to be returned to Mr. Aleynikov upon his acquittal.

The state jury returned a guilty verdict on May 1, 2015.^[22]

See also

United States v. Agrawal

References

External links

• United States of America v. Sergey Aleynikov Complaint
• Reuters Special Coverage on Sergey Aleynikov
• The Guardian
  • Former Goldman Sachs employee charged with stealing trade secrets
  • Goldman grabs hi-tech hacker
• Bloomberg News
  • Goldman Sachs Loses Grip on Its Doomsday Machine by Jonathan Weil
  • Ex-Goldman Programmer Described Code Downloads to FBI
• What's The Deal With That Goldman Sachs Programmer? by NPR Planet Money.
• Did Goldman Sachs Overstep in Criminally Charging Its Ex-Programmer? by Michael Lewis, VanityFair

Conviction Overturned & Complete Acquittal

• Acquittal Order
• Ex-Goldman programmer's conviction overturned
• Court overturns conviction of ex-Goldman's programmer
• Goldman secrets