Will a Case of International Espionage Bring Down Goldman Sachs?
Source: http://feedproxy.google.com/~r/ContrarianProfits/~3/CuEC0ebQpd8/18740Posted on Monday, July 6th, 2009 | In Market Commentary
Mathew Goldstein of Reuters broke a major story on Sunday implying just that. While most in the US were celebrating the 4th of July, a Russian immigrant living in New Jersey was being held on federal charges of stealing top-secret computer trading codes from a major New York-based financial institution—that sources say is none other than Goldman Sachs.
This news is huge. Why? Because Goldman consistently ranks number one in the NYSE’s program trading report. And this highly profitable desk is now in jeopardy.
The secret codes the accused man, Sergey Aleynikov, allegedly stole affect a section of the trading group that deals with low latency (microseconds) event-driven market data processing, strategy, and order submissions. Also known as one of Goldman’s biggest profit centers.
- Federal authorities say the platform quickly processes rapid developments in the markets and uses top secret mathematical formulas to allow the firm to make highly-profitable automated trades.
The case began unfolding on July 3, when Mr. Aleynikov was arrested in Newark airport after arriving from Chicago on “theft of trade secrets.” Mr. Aleynikov left Goldman in June to start a new job in Chicago with an unnamed trading firm, which apparently paid him three times his $400,000 salary at Goldman. A modest sum for such valued information.
So what are the implications exactly? The affidavit reads:
- Certain features of the [code], such as speed and efficiency by which it obtains and processes market data, gives the Financial Institution [Goldman] a competitive advantage among other firms that also engage in high-volume automated trading. The Financial Institution further believes that, if competing firms were to obtain the [code] and use its features, the Financial Institution’s ability to profit from the [code]’s speed and efficiency would be significantly diminished.
It is still unknown who has the codes. But when Q2 earnings come out, we’ll see if Goldman’s bottom line was hurt by the theft. Or which other firm’s program trading desk suddenly become more profitable. Sinister things are brewing, dear reader.
But thank goodness for Goldman. Where else would the White House turn to make appointments within the Administration? Well, there is Citigroup…
In “The Wall Street White House” Andrew Cockburn lists recent hires from Wall Street…
- Robert Hormats, Vice Chairman of Goldman Sachs, is to be installed as Under Secretary of Economics, Business, and Agricultural Affairs.
- Jacob Lew, Chief Financial Officer of Citigroup Alternative Investments Group, as Deputy Secretary of State (Lew’s dept. lost $509 million in the Q1 2008)
- Michael Froman, Citigroup, Deputy National Security Adviser for International Economic Affairs. Froman was formerly Chief of Staff to Robert Rubin at Treasury, before following him to Citi.
- Froman’s deputy, David Lipton, ran Citi’s global country risk management effort.
- Lewis Alexander, Citigroup’s chief economist and now Counselor to Treasury Secretary Timothy Geithner
- Neal Wolin, President and COO, Hartford Insurance Company, Property and Casualty Group now Deputy Treasury Secretary (Hartford received $3.4 billion in TARP funds).
- Gary Gensler, Goldman Sachs partner, now Chairman of the Commodity Futures Trading Commission Note: It was Gensler who was a key proponent (as Clinton’s Assistant Secretary of Treasury) in pushing the Commodity Futures Modernization Act of 2000.
- Mark Patterson, Goldman Sach’s lobbyist, now Treasury Chief of Staff
- Linda Robertson, Enron lobbyist, Chief PR Federal Reserve
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