Report: Goldman Sachs hit by theft of secret trading codes

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

Comments

[nobody]

Here's a copy of the Fed complaint:
http://www.scribd.com/doc/17118166/Complaint-Aleynikov

[Barnacle Bob]

What a crock of $hit. This is all a federal "creation" (amongst others) designed to harm/help Goldman depending on whether or not the White House is miffed at them that day. Lately it's been "miffed. "

[Barnacle Bob]

Yeah, naturally the defendant -- based on his name -- is seemingly from somewhere in Eurasia, not the States. Which means he could effectively be anything or anybody that a federal fiction-writer may decide.

I know, I can't believe I am defending Goldman Sachs either; but there seems to be too many coincidence averse to their interests lately

[andrew wilson]

this code is very efficient in identifying trading opportunities. there is very little oversight on the black box systems. the quants have benn developing these systems for years and they are very valuable. now my rant. DTC (depository trust corporation) was intentionally asleep at the switch by allowing a 13 day lag on naked short positions. the rate of fails to deliver and lag in buy-in orders opened up a feeding frenzy for sub-second systems. it will take regulators years to uncover the holes in the system. the guys who know how the plumbing works are paid well to conceal their knowledge. the regulators are inexperienced. this was inevitable and will re-occurr. institutions will play a shell game with regulators and polititians for years to come. there needs to be a break up of the big institutions. too big to fail is corporate communism.