Now we know what that tantalising Michael Lewis “One Man’s Goldman Sachs Nightmare” cover story in the upcoming issue of Vanity Fair is about…
According to a Goldman source familiar with the situation, Lewis’s story is about former Goldman Sachs programmer Sergei Alyenikov, who was tried, convicted, and then later acquitted of stealing trade secrets from Goldman.
Says our Goldman source:
“This is a sexed-up headline for a very old story, one that has already received extensive ink from the financial and tabloid press. It’s about a former GS techie, Sergei Alyenikov, who was prosecuted by the US Department of Justice for stealing proprietary technology from his employer and convicted by a jury in US federal court. When an appeals court reversed that conviction on a technicality, the US congress closed the loophole on a bipartisan vote, and President Obama then signed it into law.”
“‘Vanity Fair, which typically gives writers months to work on its longer articles, sent Goldman Sachs a series of detailed and one-sided questions about the Alyenikov case on a Saturday afternoon in July and asked for responses by Tuesday morning.”
This is the response that Goldman sent Vanity Fair:
“Goldman Sachs has spent millions of dollars and tens of thousands of hours developing the proprietary source code and technology used in our market making business. The firm has put in place extensive safeguards to protect this valuable technology. In addition to the contractual limits on disseminating confidential information, the firm restricts access to proprietary technology to those employees whose duties designing and maintaining the technology require such access. The firm has also implemented a broad array of technical safeguards to identify or block attempts ot move such code outside its firewall.
“In this case, the United States Court of Appeals for the Second Circuit determined that Sergei Alyenikov, minutes before his going-away party, ‘encrypted and uploaded to a server in Germany more than 500,000 lines of source code for Goldman’s HFT system.’ While some of those files included open source software, the Court determined that ‘a substantially greater number of the uploaded files contained proprietary code.’ The Court went on to note that the code ‘could be integrated into a competitor’s system’ and that Mr. Alyenikov then ‘deleted the encryption program as well as the history of his computer commands.’ After leaving Goldman, he downloaded the code to his home computer and brought it to his new employer, who had offered him a job paying more than 2.5 times his salary at Goldman. Those facts are not in dispute.”
The next issue of the magazine hits newsstands on Thursday. It’s Vanity Fair and Michael Lewis, so even if it’s an old story, it will probably be good…
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