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The MasterMetals Blog
By Grant McCool
NEW YORK (Reuters) – A former Goldman Sachs Group Inc (GS.N: Quote, Profile, Research, Stock Buzz) computer programer was sentenced to eight years in prison on Friday for stealing secret code used in the Wall Street bank’s valuable high-frequency trading system.
Sergey Aleynikov, was arrested by the FBI and charged in July 2009 with copying and removing trading code from Goldman before taking a new job at Teza Technologies LLC, a high-frequency trading startup firm in Chicago.
A onetime collegiate-level competitive ballroom dancer, Aleynikov, 41, was convicted of trade secrets theft and transporting stolen property across state lines on December 10 after a two-week long jury trial in Manhattan federal court.
High-frequency, computer-driven trading has become an important and competitive business. The software codes that trade shares in milliseconds are closely guarded secrets.
“I very much regret the foolish thing of downloading information,” the Russian-born father of three said at his sentencing on Friday. “Part of this information was proprietary to Goldman. I never meant to cause Goldman any harm or harm anyone at the bank.”
Aleynikov’s words fell short of U.S. District Judge Denise Cote’s hopes for “an open and honest statement of responsibility” for his criminal conduct.
“You did not do that,” said Cote, imposing a sentence of 97 months that was within the eight to 10 years recommended by the government. Cote also fined him $12,500.
Aleynikov’s lawyer, Kevin Marino, had originally asked for a sentence of probation but in court on Friday he suggested two years was adequate for what he called Aleynikov’s “foolish, tragic, horrible, ridiculous mistake.”
Aleynikov has the right to appeal the sentence. His defense lawyers have argued that the matter belonged in civil, not criminal court.
U.S. prosecutor Joseph Facciponti said the stolen code was Aleynikov’s “golden ticket” to Teza and “he stood to make millions more” there than he did at the bank. Facciponti said Aleynikov spent several months planning his move, eventually transferring 500,000 lines of Goldman Sachs source code to an outside server.
Cote had revoked the bail of Aleynikov, a dual citizen of the United States and Russia, on the grounds that there was a risk of him fleeing before sentencing.
Throughout the trial and sentencing phase, many comparisons were made with a similar case in the same courthouse against a former Societe Generale (SOGN.PA: Quote, Profile, Research, Stock Buzz) trader, Samarth Agrawal.
The citizen of India was found guilty by a jury last November of stealing high-frequency trading code from the French bank before going to a new job. On February 28, a judge sentenced him to three years in prison and he will be deported when he completes his sentence.
The case is USA v Aleynikov, U.S. District Court for the Southern District of New York, No. 10-00096.
(Reporting by Grant McCool; Editing by Tim Dobbyn)
Ex-Goldman programmer gets 8 years for code theft | Reuters: “Ex-Goldman programmer gets 8 years for code theft
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The most-active February gold contract climbed as high as $1,416.70 an ounce in electronic trading on Globex. It then pulled back a bit to $1,412.80, trading $6.60 higher in late morning dealings.
The contract had posted a 3.2% gain last week after tacking on nearly $17 on Friday to end at $1,406.20, just short of a fresh closing record. The record close for a front-month contract was $1,410.10 seen in early November. See Friday’s metals story.
The front-month December gold contract was last up $7 at $1,412.40.
“Metals rallied last week as the U.S. dollar turned lower, fears of the sovereign debt crisis intensified after Ireland agreed to a bailout, and some good economic news boosted hopes for increased demand,” Mark Leibovit, chief market strategist for VRTrader.com, said in his VR Gold Letter report dated Monday. “All this uncertainty is driving precious metals higher.”
“Of course, the money creation by the [Federal Reserve] and [European Central Bank] is driving their currencies down and, thus, commodities are rising,” he said.
Adding fuel to the rally was news last week that China’s securities regulator has given the green light to a mutual fund to invest in foreign exchange-traded funds backed by gold. Read more about the gold fund of funds.