Trading system theft can't be prosecuted: Court

Law is insufficient to apply to Goldman Sachs case

April 11 (Bloomberg) -- Sergey Aleynikov, the former Goldman Sachs Group Inc. programmer who was freed after his conviction for stealing computer code was overturned, didn’t do anything to violate the federal laws prosecutors used to charge him, an appeals court said.

The U.S. Court of Appeals in New York, which had ordered Aleynikov freed from prison in Fort Dix, New Jersey, in February, today issued an opinion explaining its reasons. The court said today that the two laws prosecutors used to charge Aleynikov, the National Stolen Property Act and the Economic Espionage Act, don’t apply to his case.

“We conclude that Aleynikov’s conduct did not constitute an offense under either the NSPA or the EEA, and that the indictment was therefore legally insufficient,” Chief Judge Dennis Jacobs wrote in the opinion, on behalf of two members of a three-judge panel. Judge Guido Calabresi filed a separate opinion agreeing that Aleynikov didn’t violate the laws.

Aleynikov, a naturalized U.S. citizen born in Russia, was convicted in December 2010. He was serving an eight-year prison sentence at the time his conviction was overturned.

Ellen Davis, a spokeswoman for U.S. Attorney Preet Bharara in Manhattan, declined to comment on today’s opinion.

On his last day of work at New York-based Goldman Sachs in June 2009, Aleynikov uploaded hundreds of thousands of lines of source code from the firm’s high-frequency trading system, prosecutors said.

He circumvented Goldman Sachs’s security, sent the code to a server in Germany, compressed and encrypted it, and took it with him to a meeting with new employers in Chicago, the U.S. said. Prosecutors argued Aleynikov wanted it as a “cheat sheet” to start a trading system at his new job.

The case is U.S. v. Aleynikov, 11-1126, U.S. Court of Appeals for the Second Circuit (Manhattan).

--With assistance from Patricia Hurtado in New York. Editor: Michael Hytha

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