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Report: Goldman Sachs hit by theft of secret trading codes

July 6, 2009 |  1:12 am

Matthew Goldstein at Reuters has broken a story about a major brokerage security breach that he believes involves Goldman Sachs' vaunted trading operation.

From Goldstein:

While most in the US were celebrating the 4th of July, a Russian immigrant living in New Jersey was being held on federal charges of stealing top-secret computer trading codes from a major New York-based financial institution -- that sources say is none other than Goldman Sachs.

The allegations, if true, are big news because the codes the accused man, Sergey Aleynikov, tried to steal is the secret code to unlocking Goldman’s automated stocks and commodities trading businesses. Federal authorities allege the computer codes and related-trading files that Aleynikov uploaded to a German-based website help this major “financial institution” generate millions of dollars in profits each year.

The platform is one of the things that apparently gives Goldman a leg-up over the competition when it comes to rapid-fire trading of stocks and commodities. Federal authorities say the platform quickly processes rapid developments in the markets and uses top secret mathematical formulas to allow the firm to make highly profitable automated trades.

Goldstein has plenty of other details, although he says Goldman wouldn't comment on the case.

Meanwhile, Tyler Durden at the Zero Hedge blog connects the dots between the security breach, some missing information in the New York Stock Exchange's latest weekly report on computer-program trading, and "the even weirder than usual market action over the past 2-3 weeks." Read Durden here.

-- Tom Petruno

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