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Sergio Posts Bond As Toxic Code Percolates In Cyberspace And Allows "Market Manipulation"

Tyler Durden's picture





 

Now Bloomberg is finally on Sergio's case. Cutting to the chase, assistant U.S. Attorney Facciponti has some choice words:

The
bank has raised the possibility that there is a danger that somebody
who knew how to use this program could use it to manipulate markets in
unfair ways,
” Facciponti said. “The copy in Germany is still out there, and we at this time do not know who else has access to it.

The prosecutor added, “Once it is out there, anybody will be able to use this, and their market share will be adversely affected.

The proprietary code lets the firm do “sophisticated,
high-speed and high-volume trades on various stock and commodities
markets,” prosecutors said in court papers. The trades generate “many
millions of dollars” each year
.

Not even going to attempt to elucidate in how many different ways the first sentence above is just...plain wrong. At least it is refreshing that none other than Goldman's own de facto attorney
admits that the firm has created a piece of code that permits "market
manipulation." When Goldman is the perpetrator, the manipulation is conveyed via
"fair ways." And when the manipulator is someone else, the ways become "unfair."

Of
course, Goldman will be happy to know that according to PACER,
Aleynikov has just posted bail and is freely roaming the grounds of
SDNY, EDNY and District of New Jersey, however the "PTS Office shall be
permitted, to the extent possible,
to monitor the deft's use of computer's or other electronic devices at
his home or place of business to ensure that the deft does not access
the data that is the subject of this criminal action." Something tells
me monitoring Sergio's (former) place of business will yield a lot more
clues in the prosecution's gathering of data for criminal action.

Maybe
I am too drunk but... what the hell is going on here? When will Kevin
Mitnick appear stage left and hold the world ransom for one hundred
million dollars after announcing he has hijacked every SPY ETF ever put
in circulation.

 

 


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Mon, 07/06/2009 - 20:03 | Link to Comment Anonymous
Mon, 07/06/2009 - 20:41 | Link to Comment calgaryschmooze
calgaryschmooze's picture

There aren't Unix/Linux/BSD chroot jails strong enough to contain that concentration of evil.  This could just be one large Goldman Sachs financial rootkit.

Mon, 07/06/2009 - 20:52 | Link to Comment Anonymous
Mon, 07/06/2009 - 23:38 | Link to Comment Anonymous
Mon, 07/06/2009 - 20:03 | Link to Comment Anonymous
Mon, 07/06/2009 - 22:13 | Link to Comment novanglus
novanglus's picture

Isn't that a tacit admission that the program is capable of manipulating the markets?  And are we supposed to believe that GS is somehow uniquely immune to the seductive powers of such programs?  Hah!  

 

Confess! Confess!

Mon, 07/06/2009 - 20:13 | Link to Comment eternalhope
eternalhope's picture

Truly a greek tragedy

Mon, 07/06/2009 - 20:31 | Link to Comment Anonymous
Mon, 07/06/2009 - 20:28 | Link to Comment Anonymous
Mon, 07/06/2009 - 20:29 | Link to Comment akreitman
akreitman's picture

What am I missing here? Did the the U.S. Attorney just accuse Goldman of building a system to unfairly manipulate the markets?  Does that mean that Goldman has to disgorge all their gains since they started developing that software?

Mon, 07/06/2009 - 20:30 | Link to Comment Anonymous
Mon, 07/06/2009 - 20:52 | Link to Comment Anonymous
Mon, 07/06/2009 - 23:05 | Link to Comment Angel Face
Angel Face's picture

Exactly.  If it can be used to manipulate markets, why would it be ethical/fair for anyone to use it at all?  What a crock!

Mon, 07/06/2009 - 20:35 | Link to Comment Anonymous
Mon, 07/06/2009 - 20:39 | Link to Comment Anonymous
Mon, 07/06/2009 - 20:43 | Link to Comment RobotTrader2 (not verified)
Mon, 07/06/2009 - 20:48 | Link to Comment Anonymous
Mon, 07/06/2009 - 22:13 | Link to Comment Anonymous
Mon, 07/06/2009 - 20:57 | Link to Comment Anonymous
Mon, 07/06/2009 - 21:52 | Link to Comment Anonymous
Mon, 07/06/2009 - 21:53 | Link to Comment Anonymous
Tue, 07/07/2009 - 09:04 | Link to Comment Anonymous
Mon, 07/06/2009 - 21:53 | Link to Comment Anonymous
Mon, 07/06/2009 - 21:54 | Link to Comment Larry Livingston
Larry Livingston's picture

The code is simple. :FIBS/resist/support/ema/dma/rmi/dmi/timeseries/1.6/standev. That right there has been following the down/up movements with great precision (macro or micro). Anything more is overkill.

 

sorry for double post.  wasnt logged in......

Mon, 07/06/2009 - 21:56 | Link to Comment EQ
EQ's picture

Based on the attorney general's statement, I suppose we can expect an FBI investigation into Goldman Sachs.  With an ultimate action of mass arrests.  BAAAAAAAAAHAAAAAAAAAHAAAAAAAAA!!!

 

Btw, the math questions from Captcha are getting tougher.

Mon, 07/06/2009 - 21:57 | Link to Comment Anonymous
Mon, 07/06/2009 - 22:03 | Link to Comment Larry Livingston
Larry Livingston's picture

I get what you are saying but could you elaborate.  I find it fascinating. ty.

Mon, 07/06/2009 - 22:52 | Link to Comment FischerBlack
FischerBlack's picture

Well, yeah, it should be relatively obvious that this code can't be used by any but a handful of existing operations, if at all. I don't think these existing operations need to be reminded that geography is important.

 

Tue, 07/07/2009 - 01:23 | Link to Comment Anonymous
Mon, 07/06/2009 - 22:18 | Link to Comment Anonymous
Mon, 07/06/2009 - 23:02 | Link to Comment FischerBlack
FischerBlack's picture

Well, duh...

The whole point is that the code is useful to only a handful of existing operations if it's useful to anyone at all. You don't get the code and then figure out how to make use of it.

I figure it like this: You have an existing operation and you feel like you're missing something. So you hire the guy who knows how to build what you're missing. He flat out refuses unless you sweeten the deal. You agree to triple his salary. He agrees, but he still doesn't want to build a 35MB trading program again from scratch. So, unbeknownst to you, he takes a shortcut. He saves some of the code from the original and figures he can recycle most of it as it is needed. No malicious intent, just lazy.

Mon, 07/06/2009 - 22:25 | Link to Comment Anonymous
Mon, 07/06/2009 - 22:29 | Link to Comment ReamUs
ReamUs's picture

This is one of those days when can't open your mouth without a song jump right out of it!

Now the first rule of Song of the South is: You do NOT talk about Song of the South.

I s'pect Br'er Goldman and Br'er Sachs may be up to NO good! But y'know what, honey? Just thinkin' about it sure does take the Zipadee Doo Dah right outa my day...

I don't know much about computer codin' or bankin' - but I do know that a bunch of folks slappin' at that tar baby ain't gonna change a thing. 

So until somebody or 'nother takes some ACTION, I think I'm gonna head over to my Laughin' Place. 'Cuz wallowing in all that misery ain't good for much of nothing. 

Sorry - stepped into the wrong movie. My bad.

Tue, 07/07/2009 - 02:46 | Link to Comment agrotera
agrotera's picture

whatever you do, ples jus don't thow me in that briar patch!

Fri, 07/10/2009 - 00:17 | Link to Comment ReamUs
ReamUs's picture

And he hopped on over the hill and out of sight.

Mon, 07/06/2009 - 22:51 | Link to Comment Anonymous
Tue, 07/07/2009 - 05:59 | Link to Comment Arm
Arm's picture

Yeah.  Thing with Goldman is they are never on the wrong side of the trade... until they blow up.  Then the government connections come in.

 

Anybody who believes Goldman is a good trading outfit either does not know anything about markets or has an investment time horizon of one month.   Goldman went broke last October... not just broke, but spectacularly broke.  They were going to make Lehman look good, but of couse the AIG rescue prevented that.  I would never invest with an outfit that foolishly invests like a casino and then hedges all its risk with one single player that everybody knew was liable for billions if the event they were insuring ocurred.  

Mon, 07/06/2009 - 23:13 | Link to Comment Comrade de Chaos
Comrade de Chaos's picture

I wonder what was his motive? My bet would be good old revenge. I guess someone else got promotion while putting less hours but being part of good boys network.

A huge indication in favor of the revenge motive is how silly and shallow his plan (if any) was.

Mon, 07/06/2009 - 23:21 | Link to Comment Comrade de Chaos
Mon, 07/06/2009 - 23:16 | Link to Comment Anonymous
Mon, 07/06/2009 - 23:38 | Link to Comment Anonymous
Mon, 07/06/2009 - 23:49 | Link to Comment hedgnome
hedgnome's picture

The bank has raised the possibility that there is a danger that somebody who knew how to use this program could use it to manipulate markets in unfair ways,

 

This quote is echoing in my head.

Is this a slip, or is it simply saying that it would be unfair to Goldman Sachs that their code got stolen?

Proprietary code, which could be used to "manipulate the markets in unfair ways", yet somehow designed by GS for some other purpose. As surely Goldman Sachs has no reason to be manipulating markets, they can be trusted with such a program.

I never thought it would be given to you on a silver platter Tyler.

This is no longer a question of capability as that is laid out crystal clear in front of us, it is a question of whether it can be proven that they have used it for so called "market manipulation" through empirical evidence, and even then whether this "manipulation" would be easily classified as criminal. Then you see how far down the rabbit hole it goes.

Mon, 07/06/2009 - 23:56 | Link to Comment Anonymous
Mon, 07/06/2009 - 23:59 | Link to Comment Anonymous
Tue, 07/07/2009 - 00:05 | Link to Comment Ajas
Ajas's picture

My take on this is that Sergey is telling the truth... why?  Simple, the COST of him attempting something malicious against GS and failing far, far outweighted the BENEFIT of succeeding... guy with a family starting a $1.2 M/yr job?

No, this was pure payback for leaving "The Firm".  This was a warning message to every single GS employee that literally the DAY you leave, you are an enemy.  And GS doesn't benefit from having every single of the world's best hackers alerted to the fact that the most sought-after trading riches are sitting around on some po-dunk FTP server in Germany... and on its back-up drives... and on personal back-ups... with copies in FBI evidence vaults and their back-ups.

It just doesn't make sense for GS to invite the gov and the public into its gravest crisis... unless there is no crisis.

 

Tue, 07/07/2009 - 08:50 | Link to Comment Anonymous
Tue, 07/07/2009 - 00:24 | Link to Comment Anonymous
Tue, 07/07/2009 - 00:59 | Link to Comment Altan311
Altan311's picture

You are not completely out of your mind; you are asking a relevant question, one I'm sure many Goldman investors are asking right now...

Tue, 07/07/2009 - 00:51 | Link to Comment Anonymous
Tue, 07/07/2009 - 01:01 | Link to Comment Ajas
Ajas's picture

BTW, this a legal filing... REALLY?!  I thought apostrophizing plurals was strictly an internet phenom.

"to the extent possible, to monitor the deft's use of computer's"

At first I thought it was TD's transcribing error... but no.  It's in the original.  Original author strongly encouraged to benefit from Steve's Grammatical Observations... http://www.youtube.com/watch?v=ABB_4xCphbU

Tue, 07/07/2009 - 03:06 | Link to Comment agrotera
agrotera's picture

I'm a little lost with all the IT info, but one thing i am hoping someone would please tell me is this: is this program sufficiently "different and special" to the extent that it is, as the Goldman people caution, capable of manipulating markets?  And if it is unusual in this way, isn't that in itself worth extensive investigation of all the uses that have already been made using this program? Is there case law applicable to situations where a party is found with programs capable of something illegal?

 

Tue, 07/07/2009 - 06:59 | Link to Comment Anonymous
Tue, 07/07/2009 - 07:08 | Link to Comment wiskeyrunner
wiskeyrunner's picture

Now I see were this is headed. Goldman can now say it’s not us causing the market manipulation  “as pointed out in the Rolling Stone article” someone now has that capability, it’s not us wink wink.

Tue, 07/07/2009 - 07:43 | Link to Comment Anonymous
Tue, 07/07/2009 - 07:44 | Link to Comment Anonymous
Tue, 07/07/2009 - 10:12 | Link to Comment wiskeyrunner
wiskeyrunner's picture

This is how Goldman gets out from under it's bad rap, they can just shrug there shoulders now and say, oops someone stole our code, not out fault.

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