------ Forwarded Message > From: Vigilius Haufniensis <thehatefuln...@comcast.net> > Date: Wed, 8 Jul 2009 22:15:57 -0700 > To: muckblit <muckb...@yahoo.com>, Robert Millegan <roads...@aol.com> > Subject: Fw: Goldman Sachs Loses Grip on Its Doomsday Machine: Jonathan Weil >
> Hey man, these posts don't seem to be going to the cia-drugs group. Can you > make sure they go through? Thanks. I think this is a HUGE story. -Vmann > > > > http://www.bloomberg.com:80/apps/news?pid=20601039&sid=aFeyqdzYcizc > > Goldman Sachs Loses Grip on Its Doomsday Machine: Jonathan Weil > > Commentary by Jonathan Weil > > > July 9 (Bloomberg) -- Never let it be said that the Justice Department can¹t > move quickly when it gets a hot tip about an alleged crime at a Wall Street > bank. It does help, though, if the party doing the complaining is the bank > itself, and not merely an aggrieved customer. > > Another plus is if the bank tells the feds the security of the U.S. financial > markets is at stake. This brings us to the strange tale of Goldman Sachs Group > Inc. <http://www.bloomberg.com/apps/quote?ticker=GS%3AUS> and Sergey > Aleynikov > <http://search.bloomberg.com/search?q=Sergey+Aleynikov&site=wnews&client=wnews > &proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields= > wnnis&sort=date:D:S:d1> . > > Aleynikov, 39, is the former Goldman computer programmer who was arrested on > theft charges July 3 as he stepped off a flight at Liberty International > Airport in Newark, New Jersey. That was two days after Goldman told the > government he had stolen its secret, rapid-fire, stock- and > commodities-trading software in early June during his last week as a Goldman > employee. Prosecutors say Aleynikov uploaded the program code to an > unidentified Web site server in Germany. > > It wasn¹t just Goldman that faced imminent harm if Aleynikov were to be > released, Assistant U.S. Attorney Joseph Facciponti told a federal magistrate > judge at his July 4 bail hearing in New York. The 34-year-old prosecutor also > dropped this bombshell: ³The 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.² > > How could somebody do this? The precise answer isn¹t obvious -- we¹re talking > about a black-box trading system here. And Facciponti didn¹t elaborate. You > don¹t need a Goldman Sachs doomsday machine to manipulate markets, of course. > A false rumor expertly planted using an ordinary telephone often will do just > fine. In any event, the judge rejected Facciponti¹s argument that Aleynikov > posed a danger to the community, and ruled he could go free on $750,000 bail. > He was released July 6. > > Market Manipulation > > All this leaves us to wonder: Did Goldman really tell the government its > high-speed, high-volume, algorithmic-trading program can be used to manipulate > markets in unfair ways, as Facciponti said? And shouldn¹t Goldman¹s bosses be > worried this revelation may cause lots of people to start hypothesizing aloud > <http://www.zerohedge.com/> about whether Goldman itself might misuse this > program? > > Here¹s some of what we do know. Aleynikov, a citizen of the U.S. and Russia, > left his $400,000-a-year salary at Goldman for a chance to triple his pay at a > start-up firm in Chicago co- founded by Misha Malyshev > <http://search.bloomberg.com/search?q=Misha+Malyshev&site=wnews&client=wnews&p > roxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wn > nis&sort=date:D:S:d1> , a former Citadel Investment Group LLC trader. > Malyshev, who oversaw high-frequency trading at Citadel, said his firm, Teza > Technologies LLC, first learned about the alleged theft July 5 and suspended > Aleynikov without pay. > > Preposterous¹ Charges > > Aleynikov¹s attorney, Sabrina Shroff, told the judge at the bail hearing that > Aleynikov never intended to use the downloaded material ³in any proprietary > way² and that the government¹s charges were ³preposterous.² > > Goldman isn¹t commenting publicly about any of this, though it seems the > bank¹s bosses want us to believe there¹s no need to worry. On July 6, Dow > Jones Newswires quoted a ³person familiar with the matter² saying this: ³The > theft has had no impact on our clients and no impact on our business.² Note > that this person was so familiar with Goldman > <http://www.bloomberg.com/apps/quote?ticker=GS%3AUS> that he or she spoke of > Goldman¹s clients as ³our clients² and Goldman¹s business as ³our business.² > > By comparison, last Saturday, while most Americans were enjoying the Fourth of > July holiday, Facciponti was in court warning of looming threats to Goldman > and the financial markets. > > ³The copy in Germany is still out there,² the prosecutor said, according to an > audio recording of the hearing. ³And we at this time do not know who else has > access to it and what¹s going to happen to that software.² > > Secret Software > > ³We believe that if the defendant is at liberty, there is a substantial danger > that he will obtain access to that software and send it on to whoever may need > it,² Facciponti said. ³And keep in mind, this is worth millions of dollars.² > > By ³millions,² it¹s unclear if that would be enough to match Goldman Chief > Executive Lloyd Blankfein > <http://search.bloomberg.com/search?q=Lloyd+Blankfein&site=wnews&client=wnews&; > proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=w > nnis&sort=date:D:S:d1> ¹s $70.3 million compensation package for 2007. Or > perhaps millions means thousands of millions, otherwise known as billions. > > Facciponti said the bank told the government that ³they do not believe that > any steps they can take would mitigate the danger of this program being > released.² He added: ³Once it is out there, anybody will be able to use this, > and their market share will be adversely affected.² All Aleynikov would need > to get the code from the German server is maybe 10 minutes with a cell phone > and an Internet connection, Facciponti said. > > Judge¹s Ruling > > The hole in Facciponti¹s argument was that the government offered no evidence > that Aleynikov had tried to disseminate the software during the month prior to > his arrest, after he downloaded it and had left his job at Goldman. That¹s the > main reason the judge, Kevin N. Fox > <http://search.bloomberg.com/search?q=Kevin+N.+Fox&site=wnews&client=wnews&pro > xystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnni > s&sort=date:D:S:d1> , cited in ruling Aleynikov could be released on bail. > > ³We don¹t deal with speculation when we come to court,² Fox said. ³We deal > with facts.² > > Meantime, it would be nice to see someone at Goldman go on the record to > explain what¹s stopping the world¹s most powerful investment bank from using > its trading program in unfair ways, too. Oh yes, and could the bank be a bit > more careful about safeguarding its trading programs from now on? Hopefully > the government is asking the same questions already. > > (Jonathan Weil > <http://search.bloomberg.com/search?q=Jonathan+Weil&site=wnews&client=wnews&pr > oxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnn > is&sort=date:D:S:d1> is a Bloomberg News columnist. The opinions expressed > are his own.) > > To contact the writer of this column: Jonathan Weil in New York at > jwe...@bloomberg.net > Last Updated: July 8, 2009 21:00 EDT > ------ End of Forwarded Message
