Goldman Sachs Loses Grip on Its Doomsday Machine

goldman-sachs1
U.S. flags fly outside 85 Broad Street, the headquarters of Goldman Sachs Group Inc., in New York, U.S., on Tuesday, April 14, 2009. Photographer: Andrew Harrer/Bloomberg News

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.

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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?

Here’s some of what we do know. Aleynikov, a citizen of the U.S. and Russia, left his $400,000-a-year salary at Goldman for a chance to triple his pay at a start-up firm in Chicago co- founded by Misha Malyshev, a former Citadel Investment Group LLC trader. Malyshev, who oversaw high-frequency trading at Citadel, said his firm, Teza Technologies LLC, first learned about the alleged theft July 5 and suspended Aleynikov without pay.

‘Preposterous’ Charges

Aleynikov’s attorney, Sabrina Shroff, told the judge at the bail hearing that Aleynikov never intended to use the downloaded material “in any proprietary way” and that the government’s charges were “preposterous.”

Goldman isn’t commenting publicly about any of this, though it seems the bank’s bosses want us to believe there’s no need to worry. On July 6, Dow Jones Newswires quoted a “person familiar with the matter” saying this: “The theft has had no impact on our clients and no impact on our business.” Note that this person was so familiar with Goldman that he or she spoke of Goldman’s clients as “our clients” and Goldman’s business as “our business.”

By comparison, last Saturday, while most Americans were enjoying the Fourth of July holiday, Facciponti was in court warning of looming threats to Goldman and the financial markets.

“The copy in Germany is still out there,” the prosecutor said, according to an audio recording of the hearing. “And we at this time do not know who else has access to it and what’s going to happen to that software.”

Secret Software

“We believe that if the defendant is at liberty, there is a substantial danger that he will obtain access to that software and send it on to whoever may need it,” Facciponti said. “And keep in mind, this is worth millions of dollars.”

By “millions,” it’s unclear if that would be enough to match Goldman Chief Executive Lloyd Blankfein’s $70.3 million compensation package for 2007. Or perhaps millions means thousands of millions, otherwise known as billions.

Facciponti said the bank told the government that “they do not believe that any steps they can take would mitigate the danger of this program being released.” He added: “Once it is out there, anybody will be able to use this, and their market share will be adversely affected.” All Aleynikov would need to get the code from the German server is maybe 10 minutes with a cell phone and an Internet connection, Facciponti said.

Judge’s Ruling

The hole in Facciponti’s argument was that the government offered no evidence that Aleynikov had tried to disseminate the software during the month prior to his arrest, after he downloaded it and had left his job at Goldman. That’s the main reason the judge, Kevin N. Fox, cited in ruling Aleynikov could be released on bail.

“We don’t deal with speculation when we come to court,” Fox said. “We deal with facts.”

Meantime, it would be nice to see someone at Goldman go on the record to explain what’s stopping the world’s most powerful investment bank from using its trading program in unfair ways, too. Oh yes, and could the bank be a bit more careful about safeguarding its trading programs from now on? Hopefully the government is asking the same questions already.

(Jonathan Weil is a Bloomberg News columnist. The opinions expressed are his own.)

To contact the writer of this column: Jonathan Weil in New York at jweil6@bloomberg.net

Last Updated: July 8, 2009 21:00 EDT
Commentary by Jonathan Weil

Source: Bloomberg

1 thought on “Goldman Sachs Loses Grip on Its Doomsday Machine

  1. Tags: Silver Gold Insider Trading Flash Crash Rigged Markets High Frequency Trading Crash JP Morgan Buy Silver (Episode 96) Goldman Sachs The Silver Bullet and the Silver Shield

    Why are all commodities gaining (HUGELY!) while the U.S. Dollar seriously staggers, like a drunken sailor? Why is there no incentive for new business startups, or true innovation? Why? Because the Market is RIGGED. Bernard Madoff made ONE BIG mistake – he ripped off RICH people. Wall St. rips us all off, every day.

    What is needed, is to cut out, entirely, from the U.S. economy, the Rothschild-owned Goldman Sachs’ ‘Fed’. Print U.S. Notes, through the U.S. Treasury, and have those backed by gold. Re-monetize silver. Any attempt to restore ‘honest money’ and re-introduce a ‘gold standard’ must cut out the foreign-owned central banks, and print any currency as U.S. Notes, via the US Treasury – with no role, whatsoever, for foreign-owned, central banks…

    Bob Chapman Explains Silver Market Manipulation, Take Down By Bullion Banksters!
    https://socioecohistory.wordpress.com/2011/05/09/bob-chapman-explains-silver-market-manipulation-take-down-by-bullion-banksters/

    650 Years Ago:
    How Venice Rigged the First, and Worst, Global Financial Crash by Paul Gallagher Printed in the American Almanac, September 4, 1995.
    http://american_almanac.tripod.com/pbgbardi.htm
    (Comment: International Bankers, Rothschilds, Rockefellers, et al (Ashkenazi/Khazarian ‘Jews’) – sit atop the secret society structure, globally. Fiat (paper) money is their game. All foreign currencies are pegged to the US Dollar, and the US Dollar was taken OFF the gold-standard, in 1971, under tricky-Dick Nixon. The U.S. Dollar is constantly on the precipice, ready to CRASH, at a moment’s notice, along with ALL the other fiat (paper) currencies. This is why they viciously attack the price of silver. ‘Venetian’ Bankers infiltrated the British Empire, and created Freemasonry. They infiltrated the American Empire, on numerous occasions. President Andrew Jackson ‘killed the [Central] Bank’ – that’s what it says on his gravestone – ‘I killed the bank’. Freemasonry (like the Bolsheviks were, and the ADL) is, fundamentally, ‘Jewish’ (http://www.rense.com/general50/zionss.htm) Governments, globally, tend to have a disproportionate membership in Freemasonry. Any wonder then, that governments are more into serving the Bankers (Ashkenazi/Khazarian ‘Jews’), than they are in serving their own people/citizens? (Hmm…Caesar, Kaiser, Khazar…very interesting!)

    How The Venetians Took Over England and Created Freemasonry
    Conference Address by Gerald Rose, Schiller Institute Conference, September, 1993
    Printed in The American Almanac, November 29, 1993
    http://american_almanac.tripod.com/venfreem.htm

    The Secret of Oz (William T. Still)
    http://www.youtube.com/watch?v=swkq2E8mswI

    The Money Masters (William T. Still)
    http://www.youtube.com/watch?v=JXt1cayx0hs

    New World Order: Ancient Plan of Secret Societies (William T. Still)
    http://www.amazon.com/New-World-Order-Ancient-Societies/dp/0910311641/ref=sr_1_6?s=books&ie=UTF8&qid=1305448871&sr=1-6

    The History of the Money Changers
    http://www.iamthewitness.com/DarylBradfordSmith_Bankers.htm

    “Economists continually try and sell the public the idea that recessions or depressions are a natural part of what they call the ‘business cycle.’ The timeline below will prove that is simply not the case. Recessions and depressions only occur because the Central Bankers manipulate the money supply, to ensure more and more is in their hands and less and less is in the hands of the people. Central Bankers developed out of money changers, and it is with these people we pick up the story in 48 B.C. below:”

    Do You Know Where You REALLY Live?
    http://freedom-school.com/do-you-know-where-you-really-live.pdf

    The ‘American’ Empire, since the establishment of the so-called ‘Federal’ ‘Reserve’ in 1913 (owned by Goldman Sucks/Rothschilds) – has been an extension of the British Empire/City of London/’Crown Corporation’/Rothschilds, et al. This is why the American Military is used as a ‘global’ police force. Primarily in the Middle East (Afghanistan, Iraq, Libya, etc.) – to use up the foreign oil resources, BEFORE tapping into the vast oil and natural gas resources that exist right here in the U.S., as well as to establish a central bank or fiat currency system there – tied to the US Dollar, of course! And, to rape these countries of all their economic and natural resources! Ultimately, their wish is to destroy the national economies of the world (can you say Greece? Ireland?) – introduce a one-world currency (just ask George Soros) – possibly destroy this, too (then offer another of THEIR pre-planned “solutions”) – always toward more centralized control over every living and non-living thing on the planet! And, their ultimate STATED goal? De-population.

    Crash JP Morgan – Buy Silver! Episode 96, The Keiser Report
    http://www.youtube.com/watch?v=wN0rcNJXFfI

    The Silver Bullet and the Silver Shield “The BEST article written on silver in Ten Years!”- Jason Hommel
    http://dont-tread-on.me/the-silver-bullet-and-the-silver-shield/

    By buying up silver (and some gold) – we can totally usurp the Banksters – we, effectively become OUR OWN CENTRAL BANKERS…

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