Highlights
– Computer programmer arrested by FBI after allegedly attempting to steal programs he helped develop at the investment banking firm Goldman Sachs
– Programmer had plans to take a higher paying position at another investment firm seeking to engage in high-volume automated trading
– Companies are likely to revise their corporate security strategies to prevent the theft of trade secrets
On July 3, 2009 Sergey Aleynikov, a computer programmer and vice president for equity strategy at the investment banking firm Goldman Sachs, was arrested by Federal Bureau of Investigation (FBI) agents after he got off a plane at Newark Liberty International Airport. Aleynikov was charged with theft of trade secrets and transporting them abroad in what authorities are describing as proprietary “black box” computer programs that allowed Goldman to make lucrative, rapid-fire trades in the financial markets.
The case highlights a growing problem for companies – especially in the financial trading business – who spend years and millions of dollars to develop software and computer systems that will give them a competitive edge in their business sectors. According to one official with Goldman, the software Aleynikov helped develop allowed the bank to “engage in sophisticated high-speed and high-volume trades on various stock and commodities markets.” Further, the official stated that the software generated “many millions of dollars of profits per year” for the bank.
One expert specializing in risk management and capital markets said computerized trading has become an increasingly important driver of revenue growth within banks over the last 10 years.
Fortunately, Goldman’s surveillance systems caught the alleged breach and data backup systems were able to record the commands Aleynikov used to copy and upload the programs to a website hosted in Germany.
In the near to medium-term, we expect companies will continue to increase their investment in digital theft detection systems and personnel trained in detecting and preventing the theft of proprietary company secrets.
Ex-Employee Was Parting with the Company
Agents who interviewed Aleynikov discovered that the programmer had plans on leaving the company on July 5, 2009 – a little more than two years after joining the company in May 2007. Aleynikov stated he had plans to join a new trading company headquartered in Chicago where he would earn triple the $400,000 salary he commanded at Goldman.
When questioned by the authorities about the programs he had copied to the website hosted on a server in Germany as well as to his home computer, laptop and a portable memory stick, Aleynikov stated he had intended to collect “open source” files on which he had worked. He said it was only later that he realized he had copied more files than he had intended.
According to a federal complaint filed in court in the Southern District of New York, the unnamed company Aleynikov planned to join in Chicago was “new” and “intended to engage in high-volume automated trading” which led to further suspicion of Aleynikov’s statements and motives.
Experts Say Programs Would Have Greater Value Abroad
Many experts agree that the programs allegedly stolen by Aleynikov would have had little value in the United States where a rival bank would have most likely called the authorities if propositioned to purchase the programs. On the other hand, if the programs were sold to financial firms in countries that have weaker enforcement mechanisms, each could have more value with the proper coding modifications to allow the software to work with the potential buyers’ databases.
Costs of Trade Secrets Theft is High
In November 2008 a former design engineer who worked for the chip maker Intel was charged with four counts of wire fraud after he allegedly stole more than $1 billion worth of proprietary trade secrets from the company. Intel accused the design engineer of accessing its computer network and downloading 13 “top-secret” Intel documents in addition to other confidential and proprietary information before taking a job with rival chip maker Advanced Micro Devices.
These cases highlight the growing number of ex-employees taking proprietary company information with them when they leave their respective company. In the near term, companies are likely to revise their policies and procedures in an effort to prevent the theft of proprietary corporate secrets and will likely pay closer attention to the activities of employees who plan to leave their company.
