Is A Case Of Quant Trading Sabotage About To Destroy Goldman Sachs?

Tyler Durden's picture

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Anonymous's picture

i KNEW I should have shorted (or otherwise bet against) GS two months ago. Damnit.

Arm's picture

Don't be so unhappy.  I shorted two months ago and am about to expire worthless

maui73's picture

Tyler . This is a huge story . thx for your great work.

andy55's picture

Agreed -- incredible work and dilligence, TD and all others on this story!  Your work makes me feel like America is not yet totally lost! 

svendthrift's picture

So, Monday morning comes a ban on shorting bankster stocks?

Anonymous's picture

bah-BOOM! 4th of july fireworks?

/w.r.t the CAPTCHA -math is hard! ;)

Anonymous's picture

OMG, Paulsonator hacked the skynet. The field of Finance hasn't been that exiting and scandalous since at least 1929. : (

Anonymous's picture

Does anyone want to bet one-fity that LEH is somehow involved?
rofl

Anonymous's picture

Finkle is Einhorn.

EINHORN (bold) is Finkle

Talkhard's picture

He kissed a man too?!?!

Comrade de Chaos's picture

Found "his" (names match)  website, he must be a cybernatic mechanism ...

http://alsen.livejournal.com/

 

let the robot wars begin : )

Anonymous's picture

uh he probably hid the source code in those images using steganography: http://en.wikipedia.org/wiki/Steganography

Anonymous's picture

I can't wait to see the liquidity on Monday morning. Will GS pull their bidz for their SLP programs? The storm is brewing bigger and bigger.

ScepticalMind's picture

Enormeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee!!!!!!!!!!! (at french for enormous....)

pinkboxtrader's picture

I read through the PDF and either this guy is the dumbest software guy making 400k/yr or it was just a mistake in uploading some parts of the source code. He gets a new job offer then in his last week of work decides to upload the critical code to a repository machine using https? And the smoking gun is his shell history and a copy of the script he left on his desktop? Any software guy with half a brain trying to steal even $100 would have transported out the source in a much more obfuscated manner. This is all assuming that 'Financial Institution' had blocked all abilities to transfer the files onto physical portable media without logging the exact content while inside the facility. Of course if security were this important then why was the 'top secret' code on a machine connected to the Internet? I'm not sure if the story adds up if there was a malicious intent. Or maybe the code in question isn't really that important and this is just a scare tactic to keep the other nerds afraid of leaving the family. If it is something good I sure hope it starts showing up on the public torrents. Maybe give 'Financial Institution' a taste of what being on the wrong side of insider information is like.

 

Either way I hope it puts the scare into big institutions relying on this kind of information control for their financial edge (or even viability). In the game of greed, how much do you pay the nerd who creates you a cash generating black-box? Well in theory it should just about be the value of the incoming cashflows minus cost of capital. If not you'd better worry about how easy that edge can disappear for an incrementally higher bidder. Background checks, patriotism and legal enforcement tougher than theft of trade secret can barely contain top secret government data. In the Capital Markets Casino with no allegiances firms should seriously worry about non-equity partners who do the critical work which must remain secret to be effective.

Anonymous's picture

Yeah, this idiot didn't know use of HISTFILE="" and doesn't know .bash_history is under $HOME and is always backed up, at least daily!

andy55's picture

Well, you have to remember there's a variety of engineer/CS people out there...  Physics, finantial, and math guys, as you know, often can be weak on the workstation/code side.   In fact, as a software engineer that's managed all kinds of minds, it's random how talented of a theorist a guy can be while his shell/workstation level of knowledge is low.

Anonymous's picture

Right on the mark p/b/t. A couple of other facts which seem to support that view: (i) the code he actually uploaded was less than 5% of the total module size (and apparently he had the entire module on his machine--not too surprising given he was the lead developer); (ii) he uploaded the code to a plain-vanilla cut-rate hosting outfit, to an account with his name on it that he had had for some time--not to some shadowy server in St. Petersburg under account name "condor." and (iii) he's a ballroom dancer (excuse me--a competitive ballroom dancer) for godsake.

Bubby BankenStein's picture

Wow!

No matter what the outcome will be, this could be written into the climax of a blockbuster drama titled "Chernobyl Syndrome"

Anonymous's picture

Why is this not on any Main Stream Media? Not even Reuters has the story, only its blog carries it. Creepy, so much for Free Press in America.
We are all doomed.

Anonymous's picture

his title was Vice President of equity strategy, anyone who knows anything about banking knows the title of VP is given out more easily than a cup of free coffee....

he's a nobody who got a new job (prob on false premises) and decided to take some work product (his or others) with him to his new employer....

IT group monitored his computer, see what he did...reported it to the Feds...

picked him up real easily as he used credit cards to book his plane tkts....

doom for trading group....i dont think so, but i so wish

with Paulson at the helm and Bernanke in their back pocket they can even probably just back day a months worth of trading to fleece the avg job

the game is rigged

Arm's picture

Anybody who knows anything about banking knows that operations are basically run by senior analysts and middle managers (VP's and associates).

Directors, and MD's are the happy faces to sell to clients.   So yes, this VP would be in fact the operational coordinator for that trading group.  That would make his knowledge very significant.

 

Anonymous's picture

I'm in IT myself. Perusing his linkedin profile shows to me that he was at the top of this specific field. Some intense technologies and experience on his resume. This guy would be quite sought after if he delivered even half of what was listed in his profile.

Anonymous's picture

i agree with #4669. There is too much corruption. Business as usual will continue. Disconnect with reality will continue.

Tyler Durden's picture

Here are examples of what happens in traditional quant trading IP cases:

http://www.reuters.com/article/mergersNews/idUSN1915944520070619

http://iapps.courts.state.ny.us/webcivil/FCASJcaptcha?forward_url=/webcivil/FCASSearch%3FtxtIndex%3D600909/2009%26cboCounty%3D30%26from%3DY

The FBI was involved in exactly zero of them. This was supposed to be a statement. Of what nature, it remains to be seen.

channel_zero's picture

TD: you clearly conflating a couple of stories.  Story 1 is the volume disappearing. Story 2, guy possibly steals code.  Mixed up in there is your heated conspiracy thinking.

You are as distracted as most are by the alphabet soup this guy was spewing.

SNMP

You can't do anything sub-second with SNMP anything. Period.  It just doesn't work that way. You can notify an admin a service has stopped, or something like that.  There's no heat here.

Erlang/OTP

Now, erlang is something that can possibly do sub-second stuff on its own.  I would be very surprised a VP is the algorithym guy.  Would he have access to the code? Probably.

boost, ACE, TibcoRV

This is software engineering sploog  for some C++ libraries and a message passing framework.  TibcoRV will get your sub-second trades.  But the magic is in the C++/erlang code. 

BTW, why mix them?  That's a baaaaad combination.  If he actually has a coding background, it's probably in C++ because Erlang doesn't have much in the way of textbooks or Sun/Microsoft to promote it in schools.

real-time distributed replicated database

More sploog.  This guy's a Veep.  Other than getting a presentation from the coders, he probably doesn't have a clue.

Can a competitor do something **quickly** with the code?  Depends on how good the shop is that will port the code.  This guy would only be instrumental in that he might have taken the code.  Is this some secret/magic code that precious few are capable of doing?  Not at all. 

Is GS evil?  Sure, but this is side-show stuff.  The mainstream media knows a good story.  This isn't one of them.

Anonymous's picture

If what you say is true the Financail Institution would have left it to internal security.

The Financail Institution chose to make this a matter of public record.

Anonymous's picture

Were they hoping it would be buried in the fog of the Southern District?

For use in their defence at a later date?

Alcuria's picture

"SNMP You can't do anything sub-second with SNMP anything. Period. It just doesn't work that way. You can notify an admin a service has stopped, or something like that. There's no heat here."

Nonsense. We use SNMP to alert us when certain thresholds are reached on WAN links, and we use SNMP SETs to make various adjustments based on which specific threshold is reached. I can assure you it happens sub-second And when using SNMPv3, this occurs in an authenticated, encrypted manner

channel_zero's picture

We use SNMP to alert us when certain thresholds are reached on WAN links

As do we.  Does the *whole* process happen in 10th's of seconds?  No.  Link fails>router fires SNMP message>SNMP server recieves message, then maybe even fires off a SET back to the router and sends a notification via snmp.  In less than 1 second? No.

Among other things, the other side of the transaction would timeout.

Anonymous's picture

The code that was stolen here does not guarantee microsecond execution. The code contains behavoral heuristics and proprietary algorithm to execute the next trade. The stuff that guarantees microsecond execution is the kernel along with messaging protocols.

Anonymous's picture

By gathering the information I have an urge to post the platform that they are using, but I shall leave it for everyone to guess.

FischerBlack's picture

Well, CNBC has picked up the story.  http://www.cnbc.com/id/31750907. And they know a good story, as you say...

But you're missing the point, anyway -- and it has nothing to do with conspiracy theories. Goldman can't go back to trading using this code now that it's out there. It will take some time for them to go to Plan B -- I don't know how long. In the meantime, no Goldman PT, no liquidty, get ready for the volatility. If this story is true, the chances of a market liquidity event have just gone up significantly.    

Anonymous's picture

> More sploog. This guy's a Veep. Other than getting a
> presentation from the coders, he probably doesn't have a > clue.

Yeah. Where'd you get that? I'm a VP (associate director, whatever..) at another random financial organisation, and I write custom compilers. You don't have to lose touch till you get to Director. ;)

Anonymous's picture

VP = Director in most US IB's.

I've worked with VP's and SVP's who still code daily, and are damn good at it. Usually it's the SVP's who get the $400k pay packet, not VP's, but possibly this guy annoyed someone on the promotions board so didn't get the title.

In any case, odd behaviour. Everyone knows not to do this kind of stuff. Amazed that GS allow this stuff through their firewall/proxy servers.

akreitman's picture

He should upload the code to wikileaks, that will level the playingfield!

Anonymous's picture

Meh. Goldman Sachs(Teflon Bank) is like John Gotti(the Deflon Don).

Bubby BankenStein's picture

A few questions:

Did GS shut down operations based on this code due to the breach?

Could this breach have anything to do with the extended session July 2?

Is the FBI on it because of GS influence, or is it such a serious threat that their hair is on fire?

Is the possibility of others adapting the code to their operations a game changer?

Is this a smoke screen?

 

 

Anonymous's picture

futures turning rederer, has the worm turned??

Anonymous's picture

smoke screen.

Anonymous's picture

When there was a scandal about some Salomon Brothers traders making illegal bids for treasuries, several senior executives (Meriwether, Gutfreund, and Strauss) were forced to resign for failing to promptly disclose the illegal bids.

Why shouldn't GS and NYSE executives be forced to resign for failing to disclose theft of SLP code to the public? Far more money is at risk through the theft of SLP code than from a pidling treasury auction.

agrotera's picture

Yea, and it is candy coat, and gloss over any significance as if all that matters is whether big daddy's quarterly earning will be hurt by the story!

maui73's picture

http://www.cnbc.com/id/31750907

 

but the this line is missing from the cnbc.com  article :"..The Zerohedge blog was all over this controversy a week ago..."

 

 

Anonymous's picture

You've got it all wrong Tyler.

Serge actually works for the Russian Mafia, long active in stealing credit card info and other such small financial potatoes (which the Russians have been good with for centuries). The Mafia is in cahoots with a Russian plutocratic family involved in Russian stock markets. Together they plan to use the high-speed code to beat the Americanskis at their own Kapitalist game, including GS.

Or it could be the KGB? Remember the "great grain heist" of the early 1970s (?) when Russian authorities broadly spoke of the great wheat crop coming in that year. Meanwhile, they were quietly buying wheat futures through intermediaries knowing their crops were totally wiped out. When the crap hit the fan, the Russians paid for the wheat they needed from the futures they bought. Talk about "material misrepresentation!"

Watch: Serge will be paid nicely for the few years time he spends in jail, and all his considerable lawyer's and wife's expenses will be covered from unidentifiable European sources. His wife will return to Russia to rejoin her family after her "horrible" experience in Amerika.

Man, it's a great novel if not the truth!

orange juice's picture

oooh well if they had it for a month it was probably old anyways. I remember reading somewhere that algorithms older than ~3 months just aren't relevant anymore, so I'd be surprised if this code was integral to what GS is running now.  Anyway, in the last few weeks we've seen tops begin to form in all markets... so we were long overdue for some gearshifting.

 

Now it's time to see the GS SLP run some short progs.

JohnKing's picture

Scoring algos could be old in days or minutes but the basic framework of data collection> indexing> storage> serving would probably have a longer shelf life.

 

 

Anonymous's picture

boom goes the DYNAMITE!

Bubby BankenStein's picture

Firmly place a tin foil hat on your head:

Serge's CV claims significant expertise in telecommunications routing, skills potentially valuable in routing / replicating exchange traffic through the back office of select secret trading systems in real time.  Such skills could also contribute to "Communications Glitches".  

Moe Speeks's picture

Excellent News Story Tyler, as usual.

Break this wide open to the world.