Sergey Aleynikov

Sergey Aleynikov (born 1970) is a former Goldman Sachs computer programmer.

Around 1990, Sergey Aleynikov emigrated from the Soviet Union to the United States.

From 1998 to 2007, he worked at IDT Corporation, writing software to better handle high volumes of phone calls.

He authored a telecommunications patent and contributed to a number of open-source Erlang and C++ projects.

He also published several Perl modules on CPAN.

Aleynikov was employed for two years, from May 2007 to June 2009, at Goldman at an ultimate salary of $400,000.

He left to join Misha Malyshev's Teza Technologies, a competing high-frequency trading firm which offered to triple his pay.

Between 2009 and 2016, he was prosecuted by NY Federal and State jurisdictions for the same conduct of allegedly copying proprietary computer source code from his employer, Goldman Sachs, before joining a competing firm.

His first prosecution in federal court in New York ultimately resulted in acquittal by the United States Court of Appeals for the Second Circuit.

The outcome of his second prosecution and trial in New York state court was a split verdict dismissed by court, which acquitted him on all counts.

One count in that order of dismissal was later overturned by New York Court of Appeals, which took a very broad interpretation of the statute, and on recommendation of prosecutors he was sentenced to time served without punishment.

The same New York Court of Appeals denied his petition to appeal on double jeopardy grounds.

His story inspired Michael Lewis's bestseller Flash Boys.

On July 3, 2009, he was arrested by FBI agents at Newark Liberty International Airport after Goldman raised the alarm over a suspected policy violation reported by Goldman on July 1, 2009, two days prior to his arrest.

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.

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

On February 10, 2010, a 3-count indictment was handed down by a federal grand jury in Manhattan.

The counts included theft of trade secrets (count 1), transportation of stolen goods (count 2), and illicit obtainment of data from a protected computer (count 3).

On July 16, 2010, Aleynikov moved to dismiss the indictment for failure to state an offense under any of the three statutes invoked: the Economic Espionage Act of 1996, the National Stolen Property Act, and the Computer Fraud and Abuse Act.

He argued that the acts he was accused of did not constitute a crime.

On September 3, 2010, the federal judge, Denise Cote, dismissed the count 3 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.

Certain trial proceedings were not public.

On December 10, he was convicted of the remaining two counts, including theft of trade secrets and transportation of stolen property.

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.

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

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.

On February 16, 2012, the United States Court of Appeals for the Second Circuit heard oral argument on his appeal and, later that day, unanimously ordered his conviction reversed and a judgment of acquittal entered, with opinion to follow.

Aleynikov was released from custody the next morning.

On April 11, 2012, Dennis Jacobs, Chief Judge of the United States Court of Appeals, published a unanimous decision in a written opinion 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."

By this time, Aleynikov had divorced and lost his savings.

According to his lawyer, his life had been "all but ruined" as a result of his incarceration.

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

Later, on December 18, 2012, the Congress enhanced the 1996 Economic Espionage Act, in order to cover similar acts in future rulings, in a law referred to as the "Theft of trade secrets clarification act of 2012".

On August 9, 2012, Aleynikov was re-arrested and charged by Manhattan District Attorney Cyrus Vance, Jr., on behalf of New York State, with "unlawful use of secret scientific material" (2 counts) and "unlawful duplication of computer-related material" (1 count) based on the same conduct.

The events leading to his arrest are covered by Michael Lewis in his 2014 book Flash Boys.

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.".

Facciponti's words in the courtroom contradicted to what David Viniar, Goldman's CFO, said a few days later on the earnings call that the sustained losses would be "very, very immaterial".

Aleynikov acknowledged downloading some source code, but maintained that his intent was to collect exclusively open-source software that is not proprietary to his then-employer.