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The Aleynikov Transcript

Tyler Durden's picture





 

Must read. An interesting section from Facciponte:

My
understanding is that Goldman Sachs realized that this was a problem
based upon their review of those logs just a few days ago. The
government was not contacted until Wednesday about this matter.

I
think what Ms. Shroff is confusing is Goldman’s civil remedies, to the
extent that it has any, and this criminal case. Maybe Goldman can go
out and get whatever the German equivalent is of a TRO. But this is, in
the government’s view, a crime that we have shown probable cause for,
and therefore it is possible that the defendant may compound his crime
and pose a danger to the community. And the bail statute allows the
court to detain him if he is a danger.

Shoff takes offense
to this and makes the point that Goldman likely knew about the
situation for over a month, delaying, for unknown reason, until
striking when it did. Some derivative conspiracy theories could be
derived from this. But in a nutshell, the math, according to the sworn
testimony by the U.S. Attorney, is that it took less than 48 hours
between Goldman realizing it had been compromised (on Wednesday) and
the FBI arresting Sergey at Newark (on Friday).

And here is what seems to be the challenge for all hackers out there:

THE
COURT: Well, what makes you think that it hasn’t already been
transferred since you do now know whether other people have access to
the Germany server? It’s already compromised, so the financial
institution has to take steps now if you’ve made it aware of the
compromise to adjust for the loss of its trading platform.

MR.
FACCIPONTE: Your Honor is correct. I could’ve been disseminated in this
time. It does not mean, however, that if it has not been disseminated
we should not take steps to prevent the defendant from disseminating
information if it is not already out there.
...

THE COURT: If
as you say, the material is on the server in Germany, if anyone can
access the material through that server, that is to say it is not only
the defendant who can access it; he might be able to provide other
persons with information that would allow them to access it, if that’s
so, then what difference does it make whether he’s detained or not if
he can communicate that information?

MR. FACCIPONTE: Right now
our understanding is that the server can only be accessed by someone
who has his user name and password.

THE COURT: Who has what, sir?

MR. FACCIPONTE: His user name and password.

THE COURT: Okay. So if he gives that to you, you can access that, isn’t that correct?

MR. FACCIPONTE: That is correct, Your Honor.

THE
COURT: So whether he’s detained or not doesn’t him from communicating
that information to you or anyone else. And therefore the server could
be accessed and the financial institutions and the markets compromised
as you have described.

MR. FACCIPONTE: It would certainly be
more difficult, Your Honor. And I don’t believe the public ought to
bear the burden or the risk of that coming to past. In addition --

THE COURT: But if he’s detained, what prevents him from communicating the information? That’s what I don’t understand.

MR. FACCIPONTE: It would be a lot harder. He would have to at the very least enlist and accomplice.

THE COURT: Okay.

MR. FACCIPONTE: Which people may not want to be accomplices. [TD: not so sure about that one]

THE COURT: That’s true whether he’s detained or at liberty.

MR.
FACCIPONTE: Okay. But if he’s at liberty he would not necessarily -- he
would not need an accomplice. He could just pass it on to another
server somewhere.

THE COURT: He may already have accomplices who
may have the information that can access the server in Germany. Whether
he’s detained or not, I still don’t understand why being detained means
the information can’t be disseminated to access the server.

MR.
FACCIPONTE: Because the server -- if the server had been in the United
States, Your Honor, we would already be preparing process to free --

THE COURT: But it’s not.

MR.
FACCIPONTE: The government needs a few days, given the holiday weekend,
it would be difficult to do that. But the government needs a few days
to consult with German authorities to take the steps to freeze that
server.

So if the court is not prepared to detain the defendant
on a general showing, the government would at least ask that the
defendant be detained until such time as they can secure the server,
which we are moving to do even as we speak now.

THE COURT: I
still don’t understand why detaining him prevents him from
communicating information so that someone can access the server. If you
make that clear to me, then I understand more acutely why you’re
arguing that he should be detained.

MR. FACCIPONTE: Well, he would --

THE COURT: If it just makes it difficult, lots of things are difficult, but not impossible.

MR.
FACCIPONTE: If he were detained now, for example, I don’t believe he
would have immediate access to telephone privileges at the NCC or MDC.
I believe it takes days to set those accounts up. He would have to tell
somebody physically. I don’t believe anybody would -- he would have to
enlist a co-conspirator right now.

And I think when you weigh
the probability of him engaging in that behavior and being able to pull
that together, first is the potential risk of just letting him go, I
believe he ought to be detained. Because he still has more burdens in
prison to disseminate his information than he does if he’s out in the
street.

So if he’s out in the street, he just needs access to a
cell phone. In prison, he needs to get access to a phone which is not a
right if he is detained. He would need to write a letter. A letter
takes several days to get to where it needs to go.

In the meantime, we would have -- we would very likely have the server locked down at that point in time.

So in a nutshell, here is Goldman's manifesto: Yesterday - Program Trading, Today - Germany, Tomorrow - The World.

 


hat tip Reuters

 


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Wed, 07/08/2009 - 07:06 | Link to Comment Ned Zeppelin
Ned Zeppelin's picture

Hopefully we 'll learn more about how the FBI became involved and why this case is even a criminal case to begin with.  This sort of event occurs constantly in all types of industry/commercial settings; trusted employee makes off with customer list as he exits company and begins calling them to come to his new employer for services.  Nothing different here so far - in each case the alleged "thief" has authorized access to  the information, and very often the information is take as the employee leaves for only his personal reference, especially if they assisted in its creation or use.  In each case (as a business attorney I have seen this numerous times) the employer cries: "Stop Thief!" and "This will ruin the company!" But usually the police have no interest since the allegations of "theft" are murky at best and hard to prove (if one has authority to hold an asset while employed, it is tough to win on a "theft" charge) and second, the issue of the possibility of destruction to the company also requires a civil court determination, along the lines Judge Fox is asking as he probes the issue of whether it matters if Bond is free on, er bond, or incarcerated.  I suppose someone will cite statutes that make this a criminal act, but intent is an element that has to be proved,  and that is why this should be nothing more than a civil matter.

Mon, 08/23/2010 - 02:18 | Link to Comment qrs521
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Wed, 07/08/2009 - 07:23 | Link to Comment Anonymous
Wed, 07/08/2009 - 11:29 | Link to Comment Anonymous
Wed, 07/08/2009 - 13:25 | Link to Comment VegasBD
VegasBD's picture

Ha! Great way to put it!

Wed, 07/08/2009 - 08:07 | Link to Comment daveM
daveM's picture

Perhaps Goldman is a bit loose with their administration and this is just one example as to how their business does not protect their clients.

Wed, 07/08/2009 - 08:27 | Link to Comment Insiderman
Insiderman's picture

Or perhaps the government doesn't want the rest of us to know that GS had license to ... do whatever they did with the software.

Wed, 07/08/2009 - 08:42 | Link to Comment Anonymous
Sat, 07/18/2009 - 00:20 | Link to Comment GILLERAN
GILLERAN's picture

I hear THAT.  I'll also wager, there are more willing 'accomplises' out there than GS imagines.

Wed, 07/08/2009 - 10:13 | Link to Comment Anonymous
Wed, 07/08/2009 - 11:29 | Link to Comment Veteran
Veteran's picture

Three. . .two. . .one. . .Patriot Act!  He's a goner.  GS says he's a threat and, as the government has made abundantly clear,  when GS says jump the feds say how high

 

 

Wed, 07/08/2009 - 11:33 | Link to Comment Anonymous
Wed, 07/08/2009 - 11:54 | Link to Comment dnarby
dnarby's picture

It would be pretty funny if he uploaded the proggy to a German goverment server.

Wed, 07/08/2009 - 13:15 | Link to Comment Anonymous
Wed, 07/08/2009 - 14:51 | Link to Comment Anonymous
Wed, 07/08/2009 - 18:15 | Link to Comment Miles Kendig
Miles Kendig's picture

Goldman is engaging, with the assistance of the 053, AKA the USA-SDNY in the attempt of having each situation as they want it.  First the firm is alleged to have permitted its employee to transfer the software to his personal computer so he could work at home.  Then Goldman told the US Attorney's affice that the dissemenation of this software posed a grave risk to the firm and by extension the whole of the United States & free markets everywhere by permitting those in possession of this source code to manipulate markets.  Now, the discussion turned to how, after a minimum of 48 hours on a foreign server, and potentially since the period June 1-5 2009 that isolating the alleged prepratrator of the compromised code would enhance to potential that further dissemenation could be prevented from that German network where it has been for an undertermined time.  As if locking a Goldman trader away could prevent those at Goldman who have access to the traders network/login/password from accessing the traders employer account/s.

 

Looking more and more like a dog chasing its tail.  No one has ever accused the US Attorney's office from having to make sense as the captioned discussion demonstrates.  One would hope that with all of the high powered assistance at Goldman's beck & call that this situation would have or could be managed better.  From my limited perspective this tell tale speaks volumes.

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