Ex-Goldman programmer out on bail in theft case

NEW YORK Tue Jul 7, 2009 12:21am EDT

Flags fly outside of the Goldman Sachs headquarters building in the financial district of New York May 8, 2009. REUTERS/Lucas Jackson

Flags fly outside of the Goldman Sachs headquarters building in the financial district of New York May 8, 2009.

Credit: Reuters/Lucas Jackson

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NEW YORK (Reuters) - A former Goldman Sachs Group Inc computer programmer accused of stealing secret trading codes from the financial firm has been released from federal custody after posting bail, authorities said Monday.

Sergey Aleynikov, 39, was arrested by the FBI Friday and charged with "theft of trade secrets." He met the terms of his $750,000 bail and was released Monday, said FBI spokesman James Margolin.

Aleynikov is accused of misusing computer codes that belong to his former employer, a New York-based financial institution that authorities did not identify in court papers but sources say is Goldman Sachs.

A transcript of Aleynikov's appearance before U.S. Magistrate Kevin Nathaniel Fox in Manhattan Saturday also shows that Aleynikov worked for Goldman.

His lawyer, Sabrina Shroff, said at that proceeding that Aleynikov told authorities after his arrest that he did not intend to sell the information or use it "contrary to my employment agreement with Goldman Sachs."

Goldman has not seen its business or clients harmed by the purported computer breach, a source familiar with the situation said Monday. The firm declined to comment.

The case could shed light on the workings of intricate trading systems developed by Goldman. It also raises questions about the security of lucrative Wall Street proprietary trading operations.

However, the New York Stock Exchange said Monday there was no connection between the alleged security breach and an error that dropped Goldman from a trading report the NYSE issued last week.

Aleynikov, a Russian immigrant living in New Jersey, was arrested Friday night as he got off a flight at Newark Liberty International Airport, according to an FBI affidavit filed in the case.

Aleynikov had been held at the Metropolitan Detention Center in Brooklyn.

Terms of his bail required a $750,000 personal recognizance bond to be secured by three financially responsible people.

His bail also included $75,000 in cash, and Aleynikov was ordered to surrender his travel documents and not to access the computer data at issue in the case.

A preliminary hearing was scheduled for August 3.

A "For Sale" sign stood on the lawn of Aleynikov's home on Monday night in Little Falls, New Jersey. The vacated two-story Colonial-style home, whose open mailbox had letters peeking out, was listed as "priced to sell" in an online advertisement by an area real estate agency.

Authorities contend Aleynikov stole codes used for sophisticated automated stock and commodities trading. They say Aleynikov, who earned $400,000 a year at Goldman, improperly copied proprietary computer code and then uploaded it to a computer server in Germany.

After he was arrested, he told authorities he had only intended to collect "open source" files on which he had worked but "later realized that he had obtained more files than he intended," the FBI agent said in the court papers.

The FBI said Aleynikov worked at the financial institution from May 2007 until June 5, when he left to work for a new company focused on high-volume automated trading.

Aleynikov was suspended by Teza Technologies LLC, a Chicago-based firm for which he started to work on July 2, Bloomberg cited the firm as saying in an emailed statement.

The firm, which was co-founded by Misha Malyshev, a former trader at Citadel Investment Group LLC, said it first learned of the allegations on July 5 and suspended Aleynikov without pay following an investigation, according to the news agency.

Teza offered to cooperate with the government and said it "was not aware of the alleged misconduct," according to the news agency.

Teza could not be immediately reached by Reuters for comment on the report.

Aleynikov's wife, Elina, told Reuters Sunday that her husband is innocent. She said in a phone interview from the couple's New Jersey home that her husband worked hard for Goldman and has been a good citizen who has lived in the United States for 19 years.

(Reporting by Martha Graybow, additional reporting by Jonathan Spicer, Elinor Comlay, Mark Egan and Ajay Kamalakaran; Editing by Tim Dobbyn, Matthew Lewis and Lincoln Feast)

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