Must read. An interesting section from Facciponte:
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.
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:
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.
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.
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.
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
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.
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.
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
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.
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
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