Appeals Court Reverses Conviction of Ex-Goldman Programmer

Just possessing a copy of some computer code is not an offense

A former Goldman Sachs Group Inc. computer programmer's conviction on charges he stole the confidential source code of the investment bank's high-speed trading system should be reversed and he should be acquitted, a federal appeals court has ruled.

Federal prosecutors had alleged that Sergey Aleynikov, 42 years old, secretly copied Goldman's source code in his last days at the investment bank and intended to use it to build a similar trading platform at his new employer.

He was sentenced to more than eight years in prison in March 2011 after he was convicted of theft of trade secrets and transportation of stolen property.

In a one-page order late Thursday, the U.S. Second Circuit Court of Appeals said Mr. Aleynikov's conviction should be reversed and he should be acquitted, but didn't explain its reasoning. The appeals court is expected to issue an opinion at a later date.

High-speed-trading firms and other financial firms aggressively protect their code, considering it a trade secret and a competitive advantage. Goldman required employees to sign a confidentiality agreement as part of their employment and that any software created by them in their jobs were the property of the investment bank.

On Friday, prosecutors asked that they be given time to seek a rehearing by the three-judge panel that originally heard arguments in the case or a review by the full Second Circuit.

Separately, U.S. District Judge Denise Cote, the judge who presided over his trial, issued an order Friday, directing that Mr. Aleynikov be released from custody, but refrained from entering an order of acquittal. The parties are expected to make arguments on whether an order of acquittal should be issued later Friday.

"We are pleased and gratified by the Second Circuit's refusal to let this wrongful conviction stand," said Kevin Marino, Mr. Aleynikov's lawyer. "The government's misuse of its power has cost Sergey Aleynikov a year of his life and a great deal more, but his nightmare ends today."

Mr. Marino had previously argued that Mr. Aleynikov only intended to use portions of the downloaded code that were "open source," or freely available.

At his sentencing last year, Mr. Aleynikov said, "I never meant to cause Goldman any harm. I did not intend to harm anyone."

Mr. Aleynikov, who holds dual Russian and U.S. citizenship, was the second person convicted in the past few years of stealing proprietary computer code related to an investment bank's high-frequency trading business. Samarth Agrawal, a former Societe Generale SA was sentenced to three years in prison in February 2011 for the theft of the French bank's computer code.

A spokeswoman for the U.S. Attorney's office in Manhattan and Goldman Sachs declined comment Friday.

Wearing a gray sweatshirt and gray sweatpants, Mr. Aleynikov was all smiles as he left the courthouse in lower Manhattan and said he wants to see his daughters—ages eight years old, six and three.

Original report here




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