Goldman Sachs Loses Grip on Its Doomsday Machine: Jonathan Weil

[Joanne98]

July 9 (Bloomberg) -- Never let it be said that the Justice Department can’t 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. and Sergey Aleynikov.

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 wasn’t 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: “The 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.”

How could somebody do this? The precise answer isn’t obvious -- we’re talking about a black-box trading system here. And Facciponti didn’t elaborate. You don’t 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 Facciponti’s 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 shouldn’t Goldman’s bosses be worried this revelation may cause lots of people to start hypothesizing aloud about whether Goldman itself might misuse this program?

http://www.bloomberg.com/apps/news?pid=20601039&sid=aFeyqdzYcizc

[Phoebe Loosinhouse]

1. It's like someone who goes to the police to complain their drug dealer ripped them off

Ooops! Did I say that? Nevermind, Officer!

[marketcrazy1]

2. Goldman Sachs

has a "black box" trading program that was stolen, if it falls into the wrong hands it could be used to unfairly manipulate the markets. today's Bloomberg headline ---- Goldman Sachs Group Inc. is on track to beat its 2007 trading-revenue record.................... things that make you go Hmmmmm????

[wuvuj]

5. It's my belief that...

...this is a large part of the financial sector recovery plan....allow the investment banks to harvest as much profit as possible in order to restore themselves.

[MercutioATC]

3. I, for one, am happy that Goldman only uses its immense power for good.

If that program got into the hands of a corporation that wanted to break their earnings record, it could result in a market crash!

:eyes:

[Wednesdays]

4. K&R

:kick:

[tinrobot]

6. "This program could use it to manipulate markets in unfair ways."

Goldman Sachs obviously uses the program.

Do you trust them to play fair?