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Investigating the Theft of Trade Secrets

BY Stanley S. Arkin, Peter B. Pope
October 27, 2009

A dangerous fact of life in today's financial firms is the threat of high-tech espionage, particularly theft of intellectual property by employees. Firms spend millions of dollars developing software that gives them an edge in the marketplace. But however carefully the computer code is protected, there are always employees who need access to update, run and maintain it. And because electronic data is so easy to copy and transport, these binary crown jewels can be stolen with the click of a mouse.

The public got a glimpse of this in the recent federal arrest of a former employee of Goldman Sachs. One of Goldman's programmers allegedly stole the firm's “black box” ' the computer code Goldman used to engage in “sophisticated high-speed and high-volume trades.” U.S. v. Aleynikov, No. 09-MJ-01553 (S.D.N.Y.). The criminal complaint against Aleynikov alleged that he began unlawfully downloading Goldman's computer code as early as June 1, 2009; he was arrested on July 3. The press reported that, sometime during that month, Aleynikov transferred the stolen data to computer servers in Germany. Arrest Over Trading Software Illuminates a Secret of Wall St., Aug., 24, 2009, NY Times, p. A1.

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