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Court Rules Software Not Protected By Fed Crime Laws, Overturns Conviction of Goldman Engineer
Tech Crunch ^ | April 14, 2012 | By Daniel McKenzie

Posted on 04/14/2012 9:55:59 PM PDT by Brad from Tennessee

Before leaving Goldman Sachs to earn a millionaire’s salary with Chicago High Frequency Trading (HFT) startup Teza Technologies, Sergey Aleynikov made one last transaction. At 5:20pm on his last day, just before his going-away party, Aleynikov uploaded 500,000 lines of encrypted source code from the Wall Street firm’s proprietary HFT system to a server located in Germany. Following the clandestine upload, Aleynikov deleted the encryption program, wiped his command history, and headed to the party.

Although Aleynikov later managed to download the source code to his home computer in New Jersy before flying to Chicago, he was apprehended by the FBI while returning through Newark Liberty International Airport.

But after his conviction at trial and imprisonment during the appeals process (his dual US-Russian citizenship presented a flight risk), Aleynikov is now a free man.

The reasons why touch the entire software industry. . .

(Excerpt) Read more at techcrunch.com ...


TOPICS: Extended News
KEYWORDS: espionage; goldmansachs; hft; software

1 posted on 04/14/2012 9:56:04 PM PDT by Brad from Tennessee
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To: Brad from Tennessee

ping


2 posted on 04/14/2012 10:12:27 PM PDT by razorback-bert (Some days it's not worth chewing through the straps.)
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To: Brad from Tennessee

Oops!......


3 posted on 04/14/2012 10:12:27 PM PDT by Red Badger (Think logically. Act normally.................)
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To: Brad from Tennessee; ShadowAce

Tech ping!......


4 posted on 04/14/2012 10:19:01 PM PDT by Red Badger (Think logically. Act normally.................)
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To: Brad from Tennessee

A small time Thief stealing from Big time Thieves. What to do.

HFT is Theft....Plain and simple.


5 posted on 04/14/2012 10:25:10 PM PDT by Revel
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To: Brad from Tennessee

The Chinese spies are gonna be on this like white on rice. It looks like one of the important points is that the software was for in-house use and not a product for sale on its own. There’s a lot of software in any high-tech company, whether it’s a chip designer or an internet start-up, that’s only for internal use.


6 posted on 04/14/2012 10:28:33 PM PDT by jiggyboy (Ten percent of poll respondents are either lying or insane)
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To: Revel

In what way is trading theft?


7 posted on 04/14/2012 10:38:34 PM PDT by USFRIENDINVICTORIA
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To: USFRIENDINVICTORIA

HFT is indeed theft, here are some links from zerohedge.com that give the basics of the practice and why it is a crime against business, the stock market, and the individual:

http://www.google.com/search?q=hft+site%3Azerohedge.com&ie=utf-8&oe=utf-8&aq=t&rls=org.mozilla:en-US:official&client=firefox-a


8 posted on 04/14/2012 10:45:04 PM PDT by jiggyboy (Ten percent of poll respondents are either lying or insane)
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To: Brad from Tennessee
Nor could Aleynikov be punished under the Economic Espionage Act (“EEA”), the court concluded, because the HFT source code was not a product that was “produced for” or “placed in” interstate commerce, as required under the EEA. Goldman Sachs planned to keep the HFT source code secret, having no intention to sell or license it to anyone in the market.

That is an extremely narrow viewpoint. Companies rarely sell or provide their source code. This ruling would seem to open the door to pulling source code for anything, even delivered products. Why? Because the source code - generally just text files on a computer - is rarely if ever delivered. Instead, source code is typically processed through a program called a compiler where it is turned into a stream of instructions for the particular computer it will be running on. (eg. windows based PC, or Mac OS/X PC, Android device, etc.) Source isn't delivered, executable binaries are delivered.

If you don't believe that reasoning, if you take the (reasonable) view that the source is well, the source of the delivered product... Then why this decision? Are not tools that enable the development, compilation, and delivery of the binaries, the delivered product, also protected? This is a tough spot here. Where do you draw the line on delivered/licensed/sold product and that which brings it to market?

9 posted on 04/14/2012 10:46:16 PM PDT by ThunderSleeps (Stop obama now! Stop the hussein - insane agenda!)
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To: USFRIENDINVICTORIA
How convenient that you left out the High Frequency part.

The part where they jump in front of everyone Else's trades before they are placed and steal a part of those other peoples trades right off the top. Yes- that is Theft!

10 posted on 04/14/2012 10:50:03 PM PDT by Revel
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To: jiggyboy; Revel

Thanks to both of you for the explanations. However, I must point out that, so far at least, no government regulator seems to consider HFT to be a crime.


11 posted on 04/14/2012 10:53:30 PM PDT by USFRIENDINVICTORIA
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To: USFRIENDINVICTORIA

Indeed. Kinda like the SEC never thought what Bernie Madoff was doing was a crime.

I’m pretty sure you’re trolling.


12 posted on 04/14/2012 11:03:29 PM PDT by jiggyboy (Ten percent of poll respondents are either lying or insane)
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To: ThunderSleeps
As I remember, the patent for this software is in Aleynikov’s name though it is owned by Goldman. The program is connected to banks of telephone switches for rapid trading. This appears to be industrial espionage but it falls through legal cracks. Goldman's lobbyists are probably working on an amendment to the federal statute.

http://blogs.findlaw.com/second_circuit/2012/04/second-cir-explains-sergey-aleynikov-source-code-theft-reversal.html

13 posted on 04/14/2012 11:26:09 PM PDT by Brad from Tennessee (A politician can't give you anything he hasn't first stolen from you.)
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To: Revel

What defines high frequency?

If I trade 1 hour before you, is that ok?

How about 1 minute? 1 Second? Millisecond? Nanosecond?


14 posted on 04/14/2012 11:34:49 PM PDT by MV=PY (The Magic Question: Who's paying for it?)
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To: jiggyboy; USFRIENDINVICTORIA

I agree that HFT is theft, it may be legalized but it still is... I also have a ‘beef’ with the Market-makers who control where a stocks value goes rather than letting the market decide impersonally.

I’ve been watching a stock lately that has 20 Million shorts against it and the market maker consistently manipulates it to keep the value of the stock from rising. It just one of the reasons why I no longer actively trade. I bought some long term holding and an just going to hold them for a few years.

Maybe it’s not the smartest strategy, but I no longer want to pay fees to brokers that are intent on thrashing the stack market to death.


15 posted on 04/15/2012 4:47:46 AM PDT by The Working Man
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To: USFRIENDINVICTORIA
Thanks to both of you for the explanations. However, I must point out that, so far at least, no government regulator seems to consider HFT to be a crime.

The don't seem to consider crony-eminent domain a crime either.

16 posted on 04/15/2012 6:48:18 AM PDT by E. Pluribus Unum (For every black person murdered by a white, thirty-nine white people are murdered by blacks.)
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To: rdb3; Calvinist_Dark_Lord; Salo; JosephW; Only1choice____Freedom; amigatec; stylin_geek; ...

17 posted on 04/15/2012 7:10:04 AM PDT by ShadowAce (Linux -- The Ultimate Windows Service Pack)
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To: USFRIENDINVICTORIA

“Thanks to both of you for the explanations. However, I must point out that, so far at least, no government regulator seems to consider HFT to be a crime.”

Don’t you know? The regulators are all people who came from places like Goldman Sachs. I am not making that up. It is true and can be verified. Even Ben came from Goldman Sachs. And Turbo tax cheat Timmy(The treasury Secretary) Came from the NY FED, Where he was Good buddies with JPM.

It is a revolving door between the government regulatory agencies and the investment banks. When they leave the SEC or any place like it then they are usually rewarded with a Job back at the banks.

And Congress, The president, Ect... Get millions and Billions in “Contributions” from the big banks. With a system like that then who is going to regulate you.

As a side note. I just found out something new. Timmy is another one that grew up in foreign countries.


18 posted on 04/15/2012 10:13:46 AM PDT by Revel
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To: MV=PY

You don’t get it. There computers are set up to “PEEK” before the other peoples trades are ever actually executed. And then after they peek then they can still place a trade before you that is based on what your trade is going to be.

It is no Different than in poker when you have a way to see the other guys cards before you place your bet.


19 posted on 04/15/2012 10:17:20 AM PDT by Revel
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To: jiggyboy

Member since April, 2005.

Read my postings of 71 threads, and 10,277 replies (10,278 now); and then tell me how I’m trolling.


20 posted on 04/15/2012 11:11:04 AM PDT by USFRIENDINVICTORIA
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To: Revel
The same information that enables an HFT algo to get ahead of you in the market is also available to you.

You just don't have the several hundred thousand dollars per year to invest to get it.

You gotta pay to play.

21 posted on 04/15/2012 11:18:40 AM PDT by pierrem15 (Claudius: "Let all the poisons that lurk in the mud hatch out.")
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To: MV=PY

Currently? A trade decision (based on some kind of running average or other algo) is made in microseconds.


22 posted on 04/15/2012 11:21:21 AM PDT by pierrem15 (Claudius: "Let all the poisons that lurk in the mud hatch out.")
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To: USFRIENDINVICTORIA

7: division fallacy, as obvious and deliberate as it gets
11: moving the goalposts
20: composition fallacy


23 posted on 04/15/2012 11:29:02 AM PDT by jiggyboy (Ten percent of poll respondents are either lying or insane)
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To: MV=PY

My #8 here is a good start for your question.


24 posted on 04/15/2012 11:30:50 AM PDT by jiggyboy (Ten percent of poll respondents are either lying or insane)
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To: Revel; jiggyboy

Thanks for your help, FReinds - you are correct. I didn’t have a full understanding.

If latency between systems allows someone to see someone else’s trade request and act on it before it is fulfilled, then that ain’t right.

My question remains, but I neglected to go past zero seconds into negative time periods. ;)


25 posted on 04/15/2012 11:56:28 AM PDT by MV=PY (The Magic Question: Who's paying for it?)
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To: pierrem15

Your figure is extremely low ball. And no it is wrong. It is like saying if a gambler can afford a special camera to see through the other players cards then that is OK.

Take Nascar for example. There are rules and limits as to what you can do. If you cheat them and get caught then you are in big trouble. Even though some drivers have the money to cheat if they want to. Some do not. And the rules are to make it reasonably fair to determine who has the best team and driver. Not who has the most money.

In an honest and just society then money should not be able to buy you everything. The only advantage that People like Goldman should have is the fact that they can afford to hire a lot of people to research how to invest.

Rigging the machinery is not a just option.


26 posted on 04/15/2012 12:01:33 PM PDT by Revel
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To: MV=PY

The bankers and the media which is basically owned by the banks(or those who profit from these kinds of trades) do not want you to see the truth. Because then you would see as you have that it is just plain wrong. And they would stand to loose a lot of ill gained money. It is great that they are not fooling you anymore. Have a great day.


27 posted on 04/15/2012 12:07:51 PM PDT by Revel
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To: jiggyboy
What are you talking about?

You accused me of trolling (for asking an honest question, which you are apparently only able to answer with ad hominem attacks). The onus is on you to prove I was trolling. You can't — because I wasn't.

28 posted on 04/15/2012 12:22:54 PM PDT by USFRIENDINVICTORIA
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To: jiggyboy
While we're discussing logical fallacies — what do you call it when someone makes a declaration of fact, which, in fact, is not a fact — and then proceeds to level ad hominem attacks against someone who politely points out the actual facts?

(You flatly stated that HFC is a “crime” — a word that has specific legal meaning. I politely pointed out that it's not actually a crime. I never stated any opinion about whether or not it should be a crime — just the bald fact that is is not actually a crime now. For that, you accuse me of trolling. I offered my lengthy track record of non-trolling posts as evidence of my character as a serious poster. You then return with a jumble of names of logical fallacies, from some numbered list you seem to have stashed away somewhere. Who's trolling now?)

29 posted on 04/15/2012 12:45:09 PM PDT by USFRIENDINVICTORIA
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To: USFRIENDINVICTORIA
In what way is trading theft?

It's no more theft than 3 card Monte. HFT is just a faster con.

30 posted on 04/16/2012 5:36:21 AM PDT by Stentor ("All cults of personality start out as high drama and end up as low comedy.")
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To: USFRIENDINVICTORIA
In what way is trading theft?

It's no more theft than 3 card Monte. HFT is just a faster con.

31 posted on 04/16/2012 5:36:31 AM PDT by Stentor ("All cults of personality start out as high drama and end up as low comedy.")
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To: Stentor

I got those dup posts in in under a nanosecond.


32 posted on 04/16/2012 5:42:00 AM PDT by Stentor ("All cults of personality start out as high drama and end up as low comedy.")
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To: USFRIENDINVICTORIA
no government regulator seems to consider HFT to be a crime.

No surprise there. The same guys who own the HFT supercomputers to milk their muppets are the same guys who write the legistlation and regulations and hand them to our "representatives" in D.C. to pass - or not pass - just as long as GS maintains its prefered status.

33 posted on 04/16/2012 5:42:27 AM PDT by Sirius Lee (Sofa King Mitt Odd Did Obamneycare)
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To: ThunderSleeps

I think this s an excellent decision, regardless of how the law interfaces with the software industry. Federal commerce power is limited. Perhaps you comments are valid, but this is an issue that should be addressed to state law, not federal. The less federal power the better.


34 posted on 04/16/2012 6:21:11 AM PDT by frithguild (You can call me Snippy the Anti-Freeper)
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To: frithguild
...this is an issue that should be addressed to state law, not federal. The less federal power the better.

I'm with you there!

35 posted on 04/16/2012 6:27:05 AM PDT by ThunderSleeps (Stop obama now! Stop the hussein - insane agenda!)
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To: Brad from Tennessee

Surely there are enough other laws on the books (cue Dr. Ferris) to get a conviction on something - theft of Trade Secrets perhaps, or has this string of charges tripped double-jeopardy?


36 posted on 04/18/2012 11:31:06 AM PDT by NonValueAdded (Steyn: Obama sez: "Nice little Supreme Court you got here. Shame if anything were to happen to it.")
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To: NonValueAdded
I think this guy was arrested shortly after Goldman discovered he had a copy of the source code. Their biggest fear may have been that someone with enough cash or credit would replicate their system and start using it for trades. This might skew the market enough to render Goldman's program not reliable.

The court may be using this case to spur Congress into clarifying the statutes so this specific activity is illegal.

37 posted on 04/18/2012 12:09:42 PM PDT by Brad from Tennessee (A politician can't give you anything he hasn't first stolen from you.)
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