IP Theft in the spotlight: The prosecution of an ex-Goldman Sachs programmer over stolen source code (and avocado-related controversies)

Aleynikov worked at Goldman Sachs as a software programmer, helping to code their high frequency trading (HFT) system. HFT systems use computer algorithms to make ultra-fast, automated trades on the stock market. In 2009, Aleynikov left Goldman Sachs for Teza Technologies, a hedge fund looking to set up a competing HFT system (for a substantial pay-rise). But before he left, Aleynikov made copies of his source code from the trading system he helped develop, and saved them to his laptop and on a server. He also deleted the network’s ‘bash code’, which keeps a record of executed commands, in an attempt to obscure his actions.
"In any other case, a conviction after near mistrial by food fight might seem like a plot twist that only Hollywood could dream up. But in the on-again-off-again legal odyssey that is the People v. Aleynikov, it was merely the latest in a long line of peculiar episodes."
 

Soon afterwards he was arrested by the FBI, and charged with offences under the US federal Espionage Act and the National Stolen Property Act. After serving one year of his eight year prison sentence, he was released after his conviction was overturned on appeal. But in a further twist, last year he was once again charged, this time by the New York County District Attorney’s Office under similar New York state laws. Aleynikov rejected a plea bargain which would have kept him out of prison, and last week was found guilty of ‘unlawful use of secret scientific material’, but acquitted on two other similar charges.  

The corporate espionage legislation has existed for decades and was not intended for computer related theft. The defence argued that their relevance to computers was a stretch, because unlike a theft of, say, gold bars, Aleynikov’s copying of the source code didn’t deprive Goldman Sachs of its ability to continue to generate profits from it. Aleynikov’s attorney continues to argue that while his actions likely constitute a breach of Goldman’s corporate confidentiality policies, they should have been pursued through a civil suit for breach of contract rather than ‘misguided’ criminal charges.

As a side note, last week’s trial also made headlines after a bizarre fight between two of the jurors. After noticing that her lunchtime sandwich was missing avocado, one juror accused the other of tampering with her food and demanded a blood test to determine whether she had been poisoned. But the presiding judge dismissed the two jurors after calling the accusations ‘completely unfounded’ and the trial ultimately continued with a 10-member panel.

Aleynikov has launched civil suits against both Goldman Sachs and the FBI agents who arrested him. His latest criminal verdict may also be overturned by the presiding judge, whose comments are due in three weeks, with further appeals likely. We look forward to seeing what happens, and any implications for IP theft in Australia.

Local insight

At KordaMentha Forensic, we regularly assist businesses in detecting and providing evidence of IP theft and other dispute related services. In our experience, theft of intellectual property by departing employees can be surprisingly expensive to businesses. Specifically, issues involving proprietary source code are becoming more commonplace as businesses become more reliant on electronic and data related information, reports, techniques and analytics.

Related articles:

• Nelvin Tam's article Metadata: The Hidden Evidence provides a good overview of how computer evidence can be used by the prosecution to establish Aleynikov’s actions.

 
Further reading on Aleynikov's story:
• Wired – Programmer Convicted in Bizarre Goldman Sachs Case - Again
• The New York Times – Ex-Goldman Sachs Programmer’s Twisting Case Has a Few Turns Left and Mixed   Verdicts in Second Trial of Aleynikov, Ex-Goldman Sachs Programmer
• Vanity Fair – Michael Lewis: Did Goldman Sachs Overstep in Criminally Charging Its Ex-Programmer?