Former Goldman Sachs Programmer, and Alleged High-Frequency Code Thief, Sergey Aleynikov Convicted in New York State Court

The legal travails of code programmer Sergey Aleynikov are like none this student of trade secret litigation has ever seen.  This long, strange trip on Mr. Aleynikov’s existentialist legal nightmare began with his arrest at the Newark airport.  He was on his way to Chicago as part of the pre-hire process at Teza Technologies, a high-frequency trading firm.  It is undisputed that he had in his possession some of the computer source code for the high-frequency trading platform at Goldman Sachs.  He helped design the Goldman Sachs platform and his intended role at Teza was going to include building them a high-frequency platform.  He was making about $400,000 at Goldman Sachs; he was going to be making about $1.2 million at Teza Technologies.

After getting arrested in the Newark airport, he obviously lost the job with Teza.  Then he was prosecuted in federal court in Manhattan, charged with criminal violations of the federal Economic Espionage Act and the National Stolen Property Act.  He was convicted in December of 2010 of those two crimes and received an eight year prison sentence.  He spent over a year in federal prison while appealing the convictions and, on appeal, the federal appellate court in New York reversed his convictions.  He was set free, with the appellate court holding that his conduct didn’t violate the two federal statutes because the computer code he took wasn’t a tangible good that he could take “physical control over” and also because the code wasn’t intended to enter interstate commerce.  This was February of 2012.

BUT then the Manhattan District Attorney’s office got involved.  Using the exact same set of facts, they state charged Mr. Aleynikov with “making a tangible reproduction” of scientific material and duplication of computer data owned by Goldman Sachs.  Such acts are allegedly crimes in New York – but query whether “source code” satisfies the definition of “scientific material”?  Regardless, the state prosecutor pushed on.  Then, Mr. Aleynikov filed civil suits against Goldman Sachs regarding his right to an officer’s legal fee indemnity for millions of dollars in fees incurred.  Was Mr. Aleynikov an officer of Goldman Sachs?  That issue is apparently being litigated still.

The trial of Mr. Aleynikov on these state charges was a virtual gong-show, as well.  Apparently one of the twelve jurors accused another of the twelve jurors of attempting to poison her jury food and was significantly distraught that some avocado slices were missing from her jury-room sandwich.  Buh-bye to both of you (after determining the allegation was specious) says the trial judge.  But now Mr. Aleynikov has a decision to make – seek a mistrial because there are only 10 jurors left?  He decided to relent and agree to move forward with 10 jurors.  On Friday, May 1st, 10 person jury voted to convict Mr. Aleynikov on the count of “stealing scientific material” and they failed to reach a verdict on a virtually identical charge regarding code that Mr. Aleynikov copied on a different day.  Inconsistent?  Sounds that way.  We imagine that Judge Daniel Conviser of State Supreme Court in Manhattan will have a bunch of post-trial motions seeking a different judgment from him notwithstanding the verdict.

Oh – I forgot to mention another part of this crazy story.   Remember that the whole thing started with Mr. Aleynikov getting stopped at the Newark airport on his way to Chicago?  A state court judge granted a motion to exclude most of the evidence acquired from Mr. Aleynikov in that airport arrest.  The judge ruled that Mr. Aleynikov’s arrest and subsequent search of his home were “presumptively unreasonable” and the product of a “mistake of law” by the federal authorities.  But that same judge denied Mr. Aleynikov’s motion to have the state charges thrown out on “double jeopardy” grounds.

This is clearly not the last we’ve heard from Sergey Aleynikov.  His lawsuits against Goldman Sachs and the FBI agents continue.  We’ll report back once we know something more.

avatar

Author Todd Sullivan

Todd has a niche practice focusing on employee departures and defections, including the litigation of injunctions and trials in cases involving noncompete and nonsolicitation covenants, trade secret misappropriation, allegations of unfair competition, duty of loyalty breaches, inevitable disclosure, and employee raiding. His clients are companies and key employees who seek his advice regarding the retention and separation process; he routinely drafts, reviews, and negotiates employment retention and separation agreements. As lead counsel, Todd has litigated more than 100 employee defection matters in federal and state trial and appellate courts and has arbitrated others throughout the United States. His clients span every industry sector — banking, insurance, biotechnology, manufacturing, life sciences, computer services, computer software, personnel placement, securities brokerage, advertising, radio and television broadcasting, legal medical and architectural professional services, government contracting, and even NASCAR. Todd recently served as lead defense counsel in one of the most significant broker defection cases ever tried before FINRA and also as lead plaintiff’s counsel in the largest-ever case of trade secrets theft in North Carolina.

More posts by Todd Sullivan