Sergey Aleynikov
Sergey Aleynikov | |
|---|---|
| Born | 1970 |
| Occupation(s) | Programmer, consultant |
| Years active | 1998–present |
| Known for | Legal cases involving alleged theft of proprietary trading source code from Goldman Sachs |
Sergey Aleynikov (born 1970) is a former programmer at Goldman Sachs. Between 2009 and 2016, he was prosecuted in both federal and state courts in New York for allegedly copying proprietary trading source code from Goldman Sachs prior to moving to a rival firm. His federal case in New York culminated in an acquittal by the United States Court of Appeals for the Second Circuit. The later state trial in New York resulted in a divided verdict that was ultimately dismissed by the court, clearing him of all charges. However, one charge was reinstated by the New York Court of Appeals, which adopted a broad interpretation of the statute; prosecutors then recommended that he serve only time already spent without additional penalties. His request to appeal on double jeopardy grounds was rejected. Aleynikov’s legal battles served as inspiration for Michael Lewis’s bestseller Flash Boys.
Career
Aleynikov emigrated from the Soviet Union to the United States around 1990. He worked at IDT Corporation from 1998 until 2007, where he developed software for high-capacity telecommunications systems. He holds a patent related to telecom routing and contributed to multiple open-source projects using Erlang and C++, as well as publishing Perl modules on CPAN.
From May 2007 through June 2009, Aleynikov was employed by Goldman Sachs with compensation reaching up to $400,000 annually. Subsequently, he accepted a position at Teza Technologies, a high-frequency trading competitor led by Misha Malyshev, which reportedly offered him triple his previous salary.
In May 2010, Aleynikov launched Omnibius, LLC, a consulting business targeting clients in the financial sector.
Federal prosecution and acquittal
On July 3, 2009, Aleynikov was apprehended by FBI agents at Newark Liberty International Airport following Goldman Sachs’s report of an alleged policy breach. He faced accusations of unlawfully copying proprietary source code utilized for "complex, rapid, and high-volume trading" across stock and commodity markets. Assistant U.S. Attorney Joseph Facciponti raised concerns about potential market manipulation stemming from the code, although Goldman’s CFO David Viniar later minimized any significant financial damages. Aleynikov acknowledged downloading some source code but maintained it consisted solely of open-source material not owned by Goldman Sachs.
A federal grand jury in Manhattan indicted him on February 10, 2010, charging him with theft of trade secrets, transportation of stolen property, and unauthorized acquisition of data from a protected computer.
In July 2010, Aleynikov sought dismissal of the indictment, contending that his conduct did not violate the Economic Espionage Act, National Stolen Property Act, or Computer Fraud and Abuse Act. By September 2010, one count was dismissed by the judge while others were allowed to proceed.
Following a partially closed trial in the Southern District of New York in December 2010, Aleynikov was convicted on two counts—trade secret theft and transportation of stolen property—and sentenced to 97 months imprisonment, three years supervised release, along with a $12,500 fine. This sentence exceeded the Federal Probation Service’s recommended term of 24 months. He had been detained three weeks before sentencing due to concerns over flight risk after his divorce.
Aleynikov appealed in March 2011, challenging the indictment’s legal basis. On February 16, 2012, the Second Circuit Court unanimously overturned his conviction and entered an acquittal. The court determined that the source code did not constitute "stolen goods" under applicable laws nor was it part of any product distributed across state lines. Aleynikov was released immediately thereafter.
By that time, Aleynikov had divorced and exhausted his financial resources; his attorney described incarceration as having "all but destroyed" his life. The government chose not to pursue further appeals, effectively ending federal charges.
In December 2012, Congress amended the Economic Espionage Act via the "Theft of Trade Secrets Clarification Act of 2012" to better address cases like Aleynikov’s moving forward.
Arrest, trial, and acquittal
On August 9, 2012, Aleynikov was taken into custody once again and charged by Manhattan District Attorney Cyrus Vance, Jr., representing New York State, with two counts of "unlawful use of secret scientific material" and one count of "unlawful duplication of computer-related material," all stemming from the same actions. This state-level prosecution originated from a complaint filed by the same federal agent responsible for the earlier investigation. Aleynikov’s attorney, Kevin Marino, accused Goldman Sachs of exerting undue influence over the vigorous prosecution and criticized the District Attorney’s office for pursuing charges despite Aleynikov’s federal conviction having been overturned and his completion of a year-long prison term:
On September 27, 2012, Aleynikov entered a plea of not guilty to all state charges and declined a plea bargain that would have avoided incarceration. His motion to dismiss on double jeopardy grounds was denied on April 5, 2013; since New York State is a separate sovereign entity, it retained the authority to prosecute independently of the federal case outcome.
On June 20, 2014, Justice Ronald Zweibel determined that the FBI did not have probable cause for Aleynikov’s arrest and subsequent search, thereby violating his Fourth Amendment protections. As a result, most evidence gathered by the FBI was excluded from trial.
Following a jury trial in New York state court on May 1, 2015, Aleynikov was acquitted of unlawful duplication but convicted on one count of unlawfully using secret scientific material; the jury was deadlocked on an additional charge. Subsequently, on July 6, 2015, Justice Daniel P. Conviser dismissed the remaining counts, concluding that no reasonable jury could convict under the statute in question. He explained:
The statute criminalizing unlawful use of secret scientific material dates back to 1967 but has been seldom enforced. Notably, the statute’s use of the term "tangible" had never been defined within New York Penal Law or relevant judicial rulings prior to this case.
NY State Appeal
Nearly nine months after Aleynikov’s acquittal by the New York Supreme Court, on April 4, 2016, the Manhattan District Attorney’s office filed an appeal seeking to reinstate the guilty verdict. They argued that
In response, defense counsel Kevin Marino strongly condemned the appeal:
On January 24, 2017, the First Department of the Appellate Division of the New York Supreme Court reinstated Aleynikov’s conviction. The appellate court rejected the trial court’s interpretation that an electronic copy did not qualify as "tangible," emphasizing that items such as compact discs and thumb drives are clearly tangible objects. The court also found fault with the lower court’s conclusion that Aleynikov lacked intent to appropriate the property; evidence supported an inference that he intended to maintain permanent control over Goldman Sachs’ source code. Aleynikov’s attorney announced intentions to seek immediate permission to appeal.
The trial judge publicly criticized this appellate ruling:
On April 20, 2017, Aleynikov was granted leave by the New York Court of Appeals to challenge the appellate court’s decision. The Court upheld the Appellate Division’s ruling on May 3, 2018; Aleynikov received a sentence equivalent to time served. His lawyer Kevin Marino denounced the conviction and indicated plans to pursue further appeals:
Malicious prosecution lawsuit
Aleynikov initiated legal action against the FBI officers involved in his arrest, alleging malicious prosecution. The court dismissed the suit concerning his federal charges, determining that the agents had reasonable grounds to suspect violations of the National Stolen Property Act and the Economic Espionage Act. Meanwhile, his malicious prosecution allegations tied to the New York state proceedings were put on hold pending the District Attorney’s appeal against the trial court’s decision to reverse his conviction.
See also
External links
- United States of America v. Sergey Aleynikov Complaint
- Reuters Special Coverage on Sergey Aleynikov
- The Guardian
- Bloomberg News
- What's The Deal With That Goldman Sachs Programmer? by NPR Planet Money.
- Did Goldman Sachs Overstep in Criminally Charging Its Ex-Programmer? by Michael Lewis, VanityFair
Conviction Overturned & Complete Acquittal