I read Michael Lewis's article in Vanity Fair about this case back in 2013, and I remember being struck by this excerpt in particular:
[Goldman] called the F.B.I. in haste, just two days before, and then put their agent through what amounted to a crash course on high-frequency trading and computer programming. McSwain later conceded that he didn’t seek out independent expert advice to study the code Serge Aleynikov had taken. (“I relied on statements from Goldman employees.”) He himself had no idea of the value of the stolen code (“Representatives of Goldman told me it was worth a lot of money”) or if any of it was actually all that special (he based his belief that the code contained trade secrets on “representations made by members of Goldman Sachs”)...The F.B.I.’s investigation before the arrest consisted of trusting Goldman’s explanation of some extremely complicated stuff, and 48 hours after Goldman called the F.B.I., Serge was arrested.
That, as the complaint highlights, the FBI instinctively acted as Goldman's punitive arm rather than conducting an independent investigation into the facts of the case is disturbing, regardless of the merit of the allegations.
"Aleynikov’s last day at Goldman was June 5, 2009. At approximately 5:20 p.m., just before his going-away party, Aleynikov encrypted and uploaded to a server in Germany more than 500,000 lines of source code for Goldman’s HFT system, including code for a substantial part of the infrastructure, and some of the algorithms and market data connectivity programs." [Page 5].
"Aleynikov also transferred some open source software licensed for use by the public that was mixed in with Goldman's proprietary code. However, a substantially greater number of the uploaded files contained proprietary code than had open source software." [Page 5, Footnote 1].
He was convicted for violating the NSPA (National Stolen Property Act) and the EEA (Economic Espionage Act). The conviction for the former was vacated because the Second Circuit construed the NSPA not to extend to intangible property. [Page 18-19]. And the EEA conviction was vacated because the statute requires the product to be "produced for" or "placed in" interstate commerce, while Goldman never intended to sell or license the software. [Page 27].
The Court concluded that he had in fact tried to take 500,000 lines of valuable and mostly proprietary source code, but that his conduct didn't fall within the reach of the two laws charged in the indictment. Solid legal analysis, but an ordinary person would say that he got off on a technicality. Which is fine--if you can lawyer your way out of a conviction, you deserve to.
But help me understand what the FBI did wrong, or Goldman for that matter. The legal questions that were resolved in Aleynikov's favor were subtle ones. How would additional investigation on the part of the FBI have helped? And what exactly did Goldman do wrong in reporting him?
I can totally believe that account. The people at Goldman were probably totally sincere in their belief that he had "stolen" their magic sauce when talking to the FBI.
These are presumably the same kind of people that think anything that's source code is some kind stuff that lays magical golden goose eggs, regardless of how trivial it is -- or even if it's open-source.
IMHO there is a much bigger, broader problem with non-technical people in positions of influence (and even the general public!). It's this same kind of disconnect that leads to mountains of trivial patents being filed. (I can't even count how many times I've heard of an engineer being put in a situation where they're told they need to patent some of their work, regardless of whether the engineer(s) think it's worth doing.)
Given Goldman's actions, it seems to me that additional defendants in this case should be Goldman itself for misrepresenting what was actually taken, and any Goldman employees personally involved. Additionally, those employees involved should be charged criminally for making a false statement to a federal agent.
I don't completely understand the problem here. Is the FBI really expected to put their investigation on hold while they first investigate the reporter? Like, if my $X vase is stolen and I say it's worth $X, I would hope the cops don't waste a lot of time getting the missing vase appraised in absentia before they try tracking it down.
Like, hopefully the FBI obeys the law and respects suspects' rights regardless of the particulars of Goldman's claim. If they're not doing that, that's a problem. But if somebody is lying to them, that's a felony they can pursue later, right?
> That, as the complaint highlights, the FBI instinctively acted as Goldman's punitive arm rather than conducting an independent investigation into the facts of the case is disturbing, to say the least.
needs, I think, to be taken with the following quote from your linked article:
> The Web site Serge had used (which has the word “subversion” in its name) as well as the location of its server (Germany) McSwain clearly found highly suspicious.
It looks like the FBI agent did "[conduct] an independent investigation into the facts"...it just wasn't a, shall we say, "good" investigation.
I had intended to write that concerns about the FBI acting as "Goldman's punitive arm" seem overblown, but as I was writing I think I changed my mind. While I initially thought liability would be a sufficient way of resolving this situation, the diffuse nature of responsibility here is going to make it really hard. On the other hand, I've seen instances where Michael Lewis himself has seemed to condemn the level of care in the application of government enforcement that seems to have been called for here.
This is one of the main problems with LEA's as it stands today, namely the fact that while many have heard about the mass privatization of the prison system, many don't realize that effective privatization of LEA's is happening. To me this is especially dangerous because the LEO's increasingly will end up failing to protect people from companies but will almost always try to do the opposite, in blatant disregard for their purpose and oaths.
Also, much of the workers rights we have today are because of workers pushing back against such tactics. I feel like the people have forgotten how we got to the 8 hour day we are at, and when we forget history we tend to end up repeating it.
While the article gives some background, here is a bit more from the wikipedia article about Sergey Aleynikov [1]:
>Sergey Aleynikov is a former Goldman Sachs computer programmer. In December 2010 he was wrongfully convicted of two counts of theft of trade secrets and sentenced to 97 months in prison. In February 2012 his conviction was overturned by the United States Court of Appeals for the Second Circuit that entered a judgement of acquittal, reversing the decision of the District court.
The main reason why he is suing the FBI is beacause:
>On June 20, 2014, upon reviewing the evidence, Justice Ronald Zweibel published a 71-page opinion in which the court ruled that F.B.I. “did not have probable cause to arrest defendant, let alone search him or his home.” The arrest was “illegal,” and Mr. Aleynikov’s “Fourth Amendment rights were violated as a result of a mistake of law.”[2] Besides finding that he was arrested illegally without probable cause, the court blocked the majority of evidence passed by the F.B.I. to prosecutors at the NY State DA's office, as that property was supposed to be returned to Mr. Aleynikov upon his acquittal.
While I agree it was egregious I think people may be missing the point. The FBI is getting a huge black eye here, Goldman is already losing out. This is how our system works.
Goldman over reached and through their efforts got this guy arrested. That they could do that, is a problem, but now everyone involved has been thoroughly spanked (with some bonus civil case spanking as well it seems). So the next time Goldman call's the FBI, they are going to be treated much more skeptically and the agents in charge are going to be unwilling to do anything based on Goldman's "word". Because the agents will remember this and they do not want to be the butt of interagency jokes, or up on civil liability.
It is worth remembering that part of the case against Mr. Aleynikov involves his use of "subversion" software, which sounds, well, subversive.
From the Vanity Fair article[1]:
"The Web site Serge had used (which has the word 'subversion' in its name) as well as the location of its server (Germany) McSwain clearly found highly suspicious."
Wow, thanks for pointing that out.. that makes this reporting look pretty laughable, and wildly uninformed:
"..through a so-called 'subversion repository'.."
Apparently I can add "not looking suspicious" to a list of reasons to use git.
Yep, that's about par for the course reporting. If it sounds ominous, it must be. I remember a small town newspaper that was all mad 10+ years ago about the master / slave IDE toggle and how it was racist. It was not an Onion article, sadly.
Is the emphasis on the word "subversion" from McSwain, or is it from the author of the article? It's not made clear from the text which one of them is emphasizing that part.
I hope he can, sooner or later, put these legal battles behind him and return to programming. He's a pretty good Erlang coder: https://github.com/saleyn
This, in particular, is extremely useful for anyone using Erlang to interact with external processes: https://github.com/saleyn/erlexec
Interest that after reading the wikipedia article the NY state prosectors messed up by trying to arrest him a second time. In that second arrest the judge ruled that the arrest by the FBI was illegal. Thereby giving him this opportunity for the civil case.
However the law is changed for future source code thefts. Here is an industry perspective
Wow, that Mondaq article is really the opposite of objective. Author Dylan W. Wiseman is really letting us know which side he's on with gems like "To correct the obvious injustice of the Aleynikov ruling..."
I think Goldman Sachs was more worried that he was taking his brain with him to a competitor. The banking cartel certainly has to be high on Silicon Valley's list of "industries that need to be disrupted". The sad thing is he's probably being prosecuted for things he created within the walls of Goldman Sachs and could probably easily re-create from scratch without them.
"He agreed to hang around for six weeks and teach other Goldman people everything he knew, so they could continue to find and fix the broken bands in their gigantic rubber ball. Four times in the course of those last weeks he mailed himself source code he was working on. (He’d later be accused of sending himself 32 megabytes of code, but what he sent was essentially the same 8 megabytes of code four times over.) The files contained a lot of open-source code he had worked with, and modified, over the past two years, mingled together with code that wasn’t open source but proprietary to Goldman Sachs. As he would later try and fail to explain to an F.B.I. agent, he hoped to disentangle the one from the other, in case he needed to remind himself how he had done what he had done with the open-source code, in the event he might need to do it again. He sent these files the same way he had sent himself files nearly every week, since his first month on the job at Goldman. “No one had ever said a word to me about it,” he says. He pulled up his browser and typed into it the words: Free Subversion Repository. Up popped a list of places that stored code, for free, and in a convenient fashion. He clicked the first link on the list. The entire process took about eight seconds. And then he did what he had always done since he first started programming computers: he deleted his bash history. To access the computer he was required to type his password. If he didn’t delete his bash history, his password would be there to see, for anyone who had access to the system."
Can I just make sure that someone mentions the most powerful motive that a shop like GS wouldlikely have?
HFT barrier to entry is expertise. Any firm has as their biggest competitive risk their employees setting up with that expertise in competition. It happens all the time. To counter that the optimal strategy of an HFT shop where an expert resigns is to sue them as far and deep into the ground as they can why?
Asalessontoallremainingstaff
This gets an HFT shop additional barrier to entry from competition from existing experts, their own.
Did GS deliberately follow this optimal tactic? I don't know, I have no evidence. Maybe the fact it is optimal for other reasons is unrelated and possibly even unknown to them. Form your own opinion on the balance of probabilities there.
1. They didn't sue him. They complained to the FBI and the government criminally prosecuted him for violation of the Economic Espionage Act.
2. The basis of the prosecution was that he exfiltrated 500,000+ lines of source code.
Doubtful this particular "tactic" could be more generally applied unless staff are engaging in similar activities now clearly prohibited under the EEA.
I'm new to this but after reading up on the background I think this case is being somewhat mischaracterized in the comments here. I know we are all anti-authoritarian hackers at heart but HN also stands for accuracy and fairness.
I would say the general tone here is "jack-booted FBI thugs falsely arrest hacker because their pal at Goldman Sachs pulled some strings". The implication being that this has all unravelled and he is now suing the government for corrupt trampling his constitutional rights.
After reading up, I would say a fairer characterization is "guy who got caught stealing proprietary code got off on a technicality because the law doesn't actually cover HFT code due to shortsighted phrasing".
Before you hit that downvote button, here's my support: the judge who overturned it called this out and Congress passed a law in 2012 to close the loophole through which he got his conviction overturned.
From the Congressional Record[1]:
Quoting the appeals court, "just before his going-away party, Aleynikov encrypted and uploaded to a server in Germany more than 500,000 lines of source code for Goldman's HFT system ..... On June 2, 2009, Aleynikov flew ..... to Chicago to attend meetings at Teza. He brought with him a flash drive and a laptop containing portions of the Goldman source code. When Aleynikov flew back the following day, he was arrested by the FBI .....''"
In his concurring opinion, Judge Calabresi [Cal-abress-E] directly called upon Congress to clarify the scope of the EEA [Electronic Espionage Act] as he wrote:
[I]t is hard for me to conclude that Congress, in [the EEA], actually meant to exempt the kind of behavior in which Aleynikov engaged ..... [n]evertheless, while concurring [in the opinion], I wish to express the hope that Congress will return to the issue and state, in appropriate language, what I believe it meant to make criminal in the EEA.
Specifically the EEA used to say "included in a product that is produced for or placed in" interstate commerce, which the court thought didn't technically cover HFT code, and now reads "a product or service used in or intended for use in". That's it. That's the loophole.
If there ever was a case of violating the spirit, but not the letter of the law, this is it.
It is quite clear that he did not violate the spirit of the law. There was no clear intent to steal any "trade secrets" from Goldman Sachs, and the analogy brought up in the last part of the article that compares it to taking home a notebook you've used for scribbling down thoughts after you've quit your job, is apt
[+] [-] blackbagboys|11 years ago|reply
[Goldman] called the F.B.I. in haste, just two days before, and then put their agent through what amounted to a crash course on high-frequency trading and computer programming. McSwain later conceded that he didn’t seek out independent expert advice to study the code Serge Aleynikov had taken. (“I relied on statements from Goldman employees.”) He himself had no idea of the value of the stolen code (“Representatives of Goldman told me it was worth a lot of money”) or if any of it was actually all that special (he based his belief that the code contained trade secrets on “representations made by members of Goldman Sachs”)...The F.B.I.’s investigation before the arrest consisted of trusting Goldman’s explanation of some extremely complicated stuff, and 48 hours after Goldman called the F.B.I., Serge was arrested.
That, as the complaint highlights, the FBI instinctively acted as Goldman's punitive arm rather than conducting an independent investigation into the facts of the case is disturbing, regardless of the merit of the allegations.
http://www.vanityfair.com/news/2013/09/michael-lewis-goldman...
[+] [-] rayiner|11 years ago|reply
"Aleynikov’s last day at Goldman was June 5, 2009. At approximately 5:20 p.m., just before his going-away party, Aleynikov encrypted and uploaded to a server in Germany more than 500,000 lines of source code for Goldman’s HFT system, including code for a substantial part of the infrastructure, and some of the algorithms and market data connectivity programs." [Page 5].
"Aleynikov also transferred some open source software licensed for use by the public that was mixed in with Goldman's proprietary code. However, a substantially greater number of the uploaded files contained proprietary code than had open source software." [Page 5, Footnote 1].
He was convicted for violating the NSPA (National Stolen Property Act) and the EEA (Economic Espionage Act). The conviction for the former was vacated because the Second Circuit construed the NSPA not to extend to intangible property. [Page 18-19]. And the EEA conviction was vacated because the statute requires the product to be "produced for" or "placed in" interstate commerce, while Goldman never intended to sell or license the software. [Page 27].
The Court concluded that he had in fact tried to take 500,000 lines of valuable and mostly proprietary source code, but that his conduct didn't fall within the reach of the two laws charged in the indictment. Solid legal analysis, but an ordinary person would say that he got off on a technicality. Which is fine--if you can lawyer your way out of a conviction, you deserve to.
But help me understand what the FBI did wrong, or Goldman for that matter. The legal questions that were resolved in Aleynikov's favor were subtle ones. How would additional investigation on the part of the FBI have helped? And what exactly did Goldman do wrong in reporting him?
[+] [-] garenp|11 years ago|reply
These are presumably the same kind of people that think anything that's source code is some kind stuff that lays magical golden goose eggs, regardless of how trivial it is -- or even if it's open-source.
IMHO there is a much bigger, broader problem with non-technical people in positions of influence (and even the general public!). It's this same kind of disconnect that leads to mountains of trivial patents being filed. (I can't even count how many times I've heard of an engineer being put in a situation where they're told they need to patent some of their work, regardless of whether the engineer(s) think it's worth doing.)
[+] [-] downandout|11 years ago|reply
[+] [-] chc|11 years ago|reply
Like, hopefully the FBI obeys the law and respects suspects' rights regardless of the particulars of Goldman's claim. If they're not doing that, that's a problem. But if somebody is lying to them, that's a felony they can pursue later, right?
[+] [-] mnarayan01|11 years ago|reply
needs, I think, to be taken with the following quote from your linked article:
> The Web site Serge had used (which has the word “subversion” in its name) as well as the location of its server (Germany) McSwain clearly found highly suspicious.
It looks like the FBI agent did "[conduct] an independent investigation into the facts"...it just wasn't a, shall we say, "good" investigation.
I had intended to write that concerns about the FBI acting as "Goldman's punitive arm" seem overblown, but as I was writing I think I changed my mind. While I initially thought liability would be a sufficient way of resolving this situation, the diffuse nature of responsibility here is going to make it really hard. On the other hand, I've seen instances where Michael Lewis himself has seemed to condemn the level of care in the application of government enforcement that seems to have been called for here.
[+] [-] arca_vorago|11 years ago|reply
Also, much of the workers rights we have today are because of workers pushing back against such tactics. I feel like the people have forgotten how we got to the 8 hour day we are at, and when we forget history we tend to end up repeating it.
https://en.wikipedia.org/wiki/Ludlow_Massacre
[+] [-] artursapek|11 years ago|reply
[+] [-] unknown|11 years ago|reply
[deleted]
[+] [-] josu|11 years ago|reply
>Sergey Aleynikov is a former Goldman Sachs computer programmer. In December 2010 he was wrongfully convicted of two counts of theft of trade secrets and sentenced to 97 months in prison. In February 2012 his conviction was overturned by the United States Court of Appeals for the Second Circuit that entered a judgement of acquittal, reversing the decision of the District court.
The main reason why he is suing the FBI is beacause:
>On June 20, 2014, upon reviewing the evidence, Justice Ronald Zweibel published a 71-page opinion in which the court ruled that F.B.I. “did not have probable cause to arrest defendant, let alone search him or his home.” The arrest was “illegal,” and Mr. Aleynikov’s “Fourth Amendment rights were violated as a result of a mistake of law.”[2] Besides finding that he was arrested illegally without probable cause, the court blocked the majority of evidence passed by the F.B.I. to prosecutors at the NY State DA's office, as that property was supposed to be returned to Mr. Aleynikov upon his acquittal.
[1] http://en.wikipedia.org/wiki/Sergey_Aleynikov [2] http://dealbook.nytimes.com//2014/06/20/judge-throws-out-evi...
[+] [-] ChuckMcM|11 years ago|reply
Goldman over reached and through their efforts got this guy arrested. That they could do that, is a problem, but now everyone involved has been thoroughly spanked (with some bonus civil case spanking as well it seems). So the next time Goldman call's the FBI, they are going to be treated much more skeptically and the agents in charge are going to be unwilling to do anything based on Goldman's "word". Because the agents will remember this and they do not want to be the butt of interagency jokes, or up on civil liability.
[+] [-] lkurtz|11 years ago|reply
[+] [-] happimess|11 years ago|reply
From the Vanity Fair article[1]:
"The Web site Serge had used (which has the word 'subversion' in its name) as well as the location of its server (Germany) McSwain clearly found highly suspicious."
[1]http://www.vanityfair.com/news/2013/09/michael-lewis-goldman...
[+] [-] boie0025|11 years ago|reply
[+] [-] protomyth|11 years ago|reply
[+] [-] IkmoIkmo|11 years ago|reply
[+] [-] mikeash|11 years ago|reply
[+] [-] acomjean|11 years ago|reply
[+] [-] davidw|11 years ago|reply
This, in particular, is extremely useful for anyone using Erlang to interact with external processes: https://github.com/saleyn/erlexec
[+] [-] amalag|11 years ago|reply
However the law is changed for future source code thefts. Here is an industry perspective
http://www.mondaq.com/unitedstates/x/215714/employee+rights+...
The only technicality that freed Aleynikov was that the source code was not sold as a product itself.
[+] [-] antiics|11 years ago|reply
[+] [-] datashovel|11 years ago|reply
[+] [-] chrisbennet|11 years ago|reply
"He agreed to hang around for six weeks and teach other Goldman people everything he knew, so they could continue to find and fix the broken bands in their gigantic rubber ball. Four times in the course of those last weeks he mailed himself source code he was working on. (He’d later be accused of sending himself 32 megabytes of code, but what he sent was essentially the same 8 megabytes of code four times over.) The files contained a lot of open-source code he had worked with, and modified, over the past two years, mingled together with code that wasn’t open source but proprietary to Goldman Sachs. As he would later try and fail to explain to an F.B.I. agent, he hoped to disentangle the one from the other, in case he needed to remind himself how he had done what he had done with the open-source code, in the event he might need to do it again. He sent these files the same way he had sent himself files nearly every week, since his first month on the job at Goldman. “No one had ever said a word to me about it,” he says. He pulled up his browser and typed into it the words: Free Subversion Repository. Up popped a list of places that stored code, for free, and in a convenient fashion. He clicked the first link on the list. The entire process took about eight seconds. And then he did what he had always done since he first started programming computers: he deleted his bash history. To access the computer he was required to type his password. If he didn’t delete his bash history, his password would be there to see, for anyone who had access to the system."
[+] [-] harry8|11 years ago|reply
HFT barrier to entry is expertise. Any firm has as their biggest competitive risk their employees setting up with that expertise in competition. It happens all the time. To counter that the optimal strategy of an HFT shop where an expert resigns is to sue them as far and deep into the ground as they can why?
As a lesson to all remaining staff
This gets an HFT shop additional barrier to entry from competition from existing experts, their own.
Did GS deliberately follow this optimal tactic? I don't know, I have no evidence. Maybe the fact it is optimal for other reasons is unrelated and possibly even unknown to them. Form your own opinion on the balance of probabilities there.
[+] [-] abalone|11 years ago|reply
1. They didn't sue him. They complained to the FBI and the government criminally prosecuted him for violation of the Economic Espionage Act.
2. The basis of the prosecution was that he exfiltrated 500,000+ lines of source code.
Doubtful this particular "tactic" could be more generally applied unless staff are engaging in similar activities now clearly prohibited under the EEA.
[+] [-] abalone|11 years ago|reply
I would say the general tone here is "jack-booted FBI thugs falsely arrest hacker because their pal at Goldman Sachs pulled some strings". The implication being that this has all unravelled and he is now suing the government for corrupt trampling his constitutional rights.
After reading up, I would say a fairer characterization is "guy who got caught stealing proprietary code got off on a technicality because the law doesn't actually cover HFT code due to shortsighted phrasing".
Before you hit that downvote button, here's my support: the judge who overturned it called this out and Congress passed a law in 2012 to close the loophole through which he got his conviction overturned.
From the Congressional Record[1]:
Quoting the appeals court, "just before his going-away party, Aleynikov encrypted and uploaded to a server in Germany more than 500,000 lines of source code for Goldman's HFT system ..... On June 2, 2009, Aleynikov flew ..... to Chicago to attend meetings at Teza. He brought with him a flash drive and a laptop containing portions of the Goldman source code. When Aleynikov flew back the following day, he was arrested by the FBI .....''"
In his concurring opinion, Judge Calabresi [Cal-abress-E] directly called upon Congress to clarify the scope of the EEA [Electronic Espionage Act] as he wrote:
[I]t is hard for me to conclude that Congress, in [the EEA], actually meant to exempt the kind of behavior in which Aleynikov engaged ..... [n]evertheless, while concurring [in the opinion], I wish to express the hope that Congress will return to the issue and state, in appropriate language, what I believe it meant to make criminal in the EEA.
Specifically the EEA used to say "included in a product that is produced for or placed in" interstate commerce, which the court thought didn't technically cover HFT code, and now reads "a product or service used in or intended for use in". That's it. That's the loophole.
If there ever was a case of violating the spirit, but not the letter of the law, this is it.
[1] http://thomas.loc.gov/cgi-bin/query/z?r112:H18DE2-0051:
[+] [-] Lewton|11 years ago|reply
http://www.vanityfair.com/news/2013/09/michael-lewis-goldman...
It is quite clear that he did not violate the spirit of the law. There was no clear intent to steal any "trade secrets" from Goldman Sachs, and the analogy brought up in the last part of the article that compares it to taking home a notebook you've used for scribbling down thoughts after you've quit your job, is apt
[+] [-] unknown|11 years ago|reply
[deleted]
[+] [-] unknown|11 years ago|reply
[deleted]
[+] [-] spiritplumber|11 years ago|reply
[+] [-] negrit|11 years ago|reply
Stupid shit like this done by the FBI is causing tax payer money. If Sergey Aleynikov wins then guess where the money will come from...
I always thought people should be financially accountable for their actions. The only thing that really work, is touching the wallet.
[+] [-] nikanj|11 years ago|reply
[+] [-] seesomesense|11 years ago|reply