Sergey Aleynikov Sues FBI Agents Who Arrested Him

http://www.bloomberg.com/news/articles/2015-02-12/goldman-sachs-ex-programmer-sues-fbi-agents-who-arrested-him

by bko • 11 years ago

391 202 11 years ago

amalag• 11 years ago

Interest that after reading the wikipedia article the NY state prosectors messed up by trying to arrest him a second time. In that second arrest the judge ruled that the arrest by the FBI was illegal. Thereby giving him this opportunity for the civil case.

However the law is changed for future source code thefts. Here is an industry perspective

http://www.mondaq.com/unitedstates/x/215714/employee+rights+...

The only technicality that freed Aleynikov was that the source code was not sold as a product itself.

antiics• 11 years ago

Wow, that Mondaq article is really the opposite of objective. Author Dylan W. Wiseman is really letting us know which side he's on with gems like "To correct the obvious injustice of the Aleynikov ruling..."

nyolfen• 11 years ago

it's called an editorial. sometimes people who write things have opinions

rudolf02• 11 years ago

Ignoring the obvious FBI blunders and them being far too buddy-buddy with corporations, doesn't he have a point?

Aleynikov intended to monetize code which was technically Goldman's property, even if he wrote most of it. It would be a different story if he simply wanted to keep the code for archival and review purposes; he actually tried to help a startup by using it.

It sounds like he did violate the spirit of the law, if not the letter.

josu• 11 years ago

While the article gives some background, here is a bit more from the wikipedia article about Sergey Aleynikov [1]:

Sergey Aleynikov is a former Goldman Sachs computer programmer. In December 2010 he was wrongfully convicted of two counts of theft of trade secrets and sentenced to 97 months in prison. In February 2012 his conviction was overturned by the United States Court of Appeals for the Second Circuit that entered a judgement of acquittal, reversing the decision of the District court.

The main reason why he is suing the FBI is beacause:

On June 20, 2014, upon reviewing the evidence, Justice Ronald Zweibel published a 71-page opinion in which the court ruled that F.B.I. “did not have probable cause to arrest defendant, let alone search him or his home.” The arrest was “illegal,” and Mr. Aleynikov’s “Fourth Amendment rights were violated as a result of a mistake of law.”[2] Besides finding that he was arrested illegally without probable cause, the court blocked the majority of evidence passed by the F.B.I. to prosecutors at the NY State DA's office, as that property was supposed to be returned to Mr. Aleynikov upon his acquittal.

[1] http://en.wikipedia.org/wiki/Sergey_Aleynikov [2] http://dealbook.nytimes.com//2014/06/20/judge-throws-out-evi...

lkurtz• 11 years ago

You mean Goldman calling up a friend at the FBI doesn't count as probable cause??

hnnewguy4• 11 years ago

Goldman Sachs was entirely within their rights to contact the FBI if they believed proprietary information was stolen from them by an ex-employee. It's the government (read: FBI) that screwed up here, as is most often the case.

Someone12343• 11 years ago

The US is a pretty strange place when Bank of America can literally break into someone's home, steal everything they own, and never suffer either financially or criminally, but all a corporation has to do is point their finger at an individual and that individual will be arrested and prosecuted.

It also reminds me of the AT&T case where someone accessed records on public URLs and instead of AT&T getting a black eye for being so incompetent the dude went to jail. When will a corporation metaphorically go to jail? They steal, they lie, they cheat, they launder money, but yet they're always "too big to prosecute."

ChuckMcM4• 11 years ago

While I agree it was egregious I think people may be missing the point. The FBI is getting a huge black eye here, Goldman is already losing out. This is how our system works.

Goldman over reached and through their efforts got this guy arrested. That they could do that, is a problem, but now everyone involved has been thoroughly spanked (with some bonus civil case spanking as well it seems). So the next time Goldman call's the FBI, they are going to be treated much more skeptically and the agents in charge are going to be unwilling to do anything based on Goldman's "word". Because the agents will remember this and they do not want to be the butt of interagency jokes, or up on civil liability.

loopholeclosed8• 11 years ago

http://www.mondaq.com/unitedstates/x/215714/employee+rights+...

They've already "clarified" and "closed" that loophole. Next time, the programmer actually would go to jail.

jqm• 11 years ago

"the next time Goldman calls the FBI, they are going to be treated much more sceptically...."

maybe. but I sort of doubt it.

spiritplumber• 11 years ago

Whoever loses, we win?

negrit• 11 years ago

We already lost.

Stupid shit like this done by the FBI is causing tax payer money. If Sergey Aleynikov wins then guess where the money will come from...

I always thought people should be financially accountable for their actions. The only thing that really work, is touching the wallet.

task_queue• 11 years ago

It's unfortunate that the trend for law enforcement agencies is to shield individual agents and officers from any personal culpability. They'll get a month of paid leave, the agency pays out and they get to return to the same position with the same pay.

The only lesson learned is that their coworkers, bosses and justice system will bend over backwards to make sure that they can get away with abuse and injustice without repercussions.

hurin4• 11 years ago

This.

We tend to cheer for social justice against government abuse of power, but we're always the ones footing the bill.

Settlement and damage costs should come out of the agent's salaries across the entire organization.

Maybe police officers will stop shooting black teenagers if everyone on the force is docked $5000 for each application of lethal force.

happimess2• 11 years ago

It is worth remembering that part of the case against Mr. Aleynikov involves his use of "subversion" software, which sounds, well, subversive.

From the Vanity Fair article[1]:

"The Web site Serge had used (which has the word 'subversion' in its name) as well as the location of its server (Germany) McSwain clearly found highly suspicious."

[1]http://www.vanityfair.com/news/2013/09/michael-lewis-goldman...

protomyth3• 11 years ago

Yep, that's about par for the course reporting. If it sounds ominous, it must be. I remember a small town newspaper that was all mad 10+ years ago about the master / slave IDE toggle and how it was racist. It was not an Onion article, sadly.

amitparikh• 11 years ago

This quote was not about the reporter or the news outlet. Michael McSwain was the FBI agent in charge of the case, and the reporting seems to suggest that having 'subversion' in Sergey's Web history was a component of building probable cause.

charonn0• 11 years ago

It wasn't a small town, it was Los Angeles County.

http://www.cnn.com/2003/TECH/ptech/11/26/master.term.reut/

kevin_thibedeau• 11 years ago

I believe that stemmed from a lawsuit by a woman who took offense to those terms being used in some documentation that unfortunately passed through her hands.

boie00254• 11 years ago

Wow, thanks for pointing that out.. that makes this reporting look pretty laughable, and wildly uninformed: "..through a so-called 'subversion repository'.." Apparently I can add "not looking suspicious" to a list of reasons to use git.

boie00254• 11 years ago

Sergey must not have visited HN, because it seems safe to say had they found that in the browser history it would have been mentioned as well.

recursive• 11 years ago

noun 1. British Slang. a foolish or contemptible person.

I would say Source Safe is your best bet.

acomjean2• 11 years ago

I was wondering why everyone calls it svn now.

DamnYuppie• 11 years ago

I am not sure this issue has anything to do with that. I believe it is called svn because it was replacing cvs and developers do so love symmetry.

IkmoIkmo• 11 years ago

Oh god... Thanks for pointing that out, hilarious and saddening at the same time.

mikeash3• 11 years ago

Is the emphasis on the word "subversion" from McSwain, or is it from the author of the article? It's not made clear from the text which one of them is emphasizing that part.

happimess2• 11 years ago

To my ear, it seems that the emphasis comes from the FBI agent. The reporter keeps a fairly neutral voice, but the paragraph quoted, combined with the ones immediately before and after, paint the FBI agent as uninformed and credulous.

davidw• 11 years ago

I hope he can, sooner or later, put these legal battles behind him and return to programming. He's a pretty good Erlang coder: https://github.com/saleyn

This, in particular, is extremely useful for anyone using Erlang to interact with external processes: https://github.com/saleyn/erlexec

blackbagboys3• 11 years ago

I read Michael Lewis's article in Vanity Fair about this case back in 2013, and I remember being struck by this excerpt in particular:

[Goldman] called the F.B.I. in haste, just two days before, and then put their agent through what amounted to a crash course on high-frequency trading and computer programming. McSwain later conceded that he didn’t seek out independent expert advice to study the code Serge Aleynikov had taken. (“I relied on statements from Goldman employees.”) He himself had no idea of the value of the stolen code (“Representatives of Goldman told me it was worth a lot of money”) or if any of it was actually all that special (he based his belief that the code contained trade secrets on “representations made by members of Goldman Sachs”)...The F.B.I.’s investigation before the arrest consisted of trusting Goldman’s explanation of some extremely complicated stuff, and 48 hours after Goldman called the F.B.I., Serge was arrested.

That, as the complaint highlights, the FBI instinctively acted as Goldman's punitive arm rather than conducting an independent investigation into the facts of the case is disturbing, regardless of the merit of the allegations.

http://www.vanityfair.com/news/2013/09/michael-lewis-goldman...

mnarayan01• 11 years ago

That, as the complaint highlights, the FBI instinctively acted as Goldman's punitive arm rather than conducting an independent investigation into the facts of the case is disturbing, to say the least.

needs, I think, to be taken with the following quote from your linked article:

The Web site Serge had used (which has the word “subversion” in its name) as well as the location of its server (Germany) McSwain clearly found highly suspicious.

It looks like the FBI agent did "[conduct] an independent investigation into the facts"...it just wasn't a, shall we say, "good" investigation.

I had intended to write that concerns about the FBI acting as "Goldman's punitive arm" seem overblown, but as I was writing I think I changed my mind. While I initially thought liability would be a sufficient way of resolving this situation, the diffuse nature of responsibility here is going to make it really hard. On the other hand, I've seen instances where Michael Lewis himself has seemed to condemn the level of care in the application of government enforcement that seems to have been called for here.

logn• 11 years ago

How can we let FBI agents get away with arresting people for using Subversion? That's hardly an investigation into facts... more like an investigation into only the first definition of words, along with a lot of jumping to conclusions.

garenp• 11 years ago

I can totally believe that account. The people at Goldman were probably totally sincere in their belief that he had "stolen" their magic sauce when talking to the FBI.

These are presumably the same kind of people that think anything that's source code is some kind stuff that lays magical golden goose eggs, regardless of how trivial it is -- or even if it's open-source.

IMHO there is a much bigger, broader problem with non-technical people in positions of influence (and even the general public!). It's this same kind of disconnect that leads to mountains of trivial patents being filed. (I can't even count how many times I've heard of an engineer being put in a situation where they're told they need to patent some of their work, regardless of whether the engineer(s) think it's worth doing.)

downandout• 11 years ago

Given Goldman's actions, it seems to me that additional defendants in this case should be Goldman itself for misrepresenting what was actually taken, and any Goldman employees personally involved. Additionally, those employees involved should be charged criminally for making a false statement to a federal agent.

tptacek11• 11 years ago

Wait, from where are we getting the presumption that GS misrepresented what was taken? There's a meme that Aleynikov copied mostly GPL'd code, but despite Techdirt-styling reporting to that effect, the opposite turns out to be true: the court, carefully considering the notion of open-source code, found that a large portion of what Aleynikov knowingly took was proprietary and secret; along with it, Aleynikov also took confidential internal GS documentation about the connectivity their order routing system had to exchanges.

chc2• 11 years ago

I don't completely understand the problem here. Is the FBI really expected to put their investigation on hold while they first investigate the reporter? Like, if my $X vase is stolen and I say it's worth $X, I would hope the cops don't waste a lot of time getting the missing vase appraised in absentia before they try tracking it down.

Like, hopefully the FBI obeys the law and respects suspects' rights regardless of the particulars of Goldman's claim. If they're not doing that, that's a problem. But if somebody is lying to them, that's a felony they can pursue later, right?

blackbagboys3• 11 years ago

To extend and correct your analogy, if you accuse your neighbor of stealing your vase, I would hope the cops spend some time investigating whether a) there was actually a vase to begin with and b) he actually took it, before they haul him off to prison.

Determining whether or not a crime has actually occurred is usually an essential part of a criminal investigation.

lotsofmangos• 11 years ago

Is the FBI really expected to put their investigation on hold while they first investigate the reporter?

Yes, the very first thing you should do if investigating a reported crime is find out if the report is reliable.

artursapek• 11 years ago

For those interested in a more detailed account, Lewis' Flash Boys is a really great book. http://www.amazon.com/Flash-Boys-Michael-Lewis/dp/0393244660

tptacek11• 11 years ago

_Flash Boys_ is a terrible book. It's incoherent, very poorly ties the narrative about this case to HFT, gets a lot of trading details wrong, and makes an underdog story out of an attempt by a bunch of bigbank insiders to route bigbank brokerage trade through their new firm. If you're interested in the technical story behind HFT, a much better thing to read is that series of articles that's been running on HN for the last few months.

I'm a Michael Lewis fan --- I even liked _Next: The Future Just Happened_ --- but this book was so disappointing I've actually become disillusioned. What else was he wrong about that I wasn't clued in enough to notice? Do Greek people in reality try hard to pay their taxes? Was Chad Bradford a terrible deal for the A's? Was Marillion a terrible band?

arca_vorago• 11 years ago

This is one of the main problems with LEA's as it stands today, namely the fact that while many have heard about the mass privatization of the prison system, many don't realize that effective privatization of LEA's is happening. To me this is especially dangerous because the LEO's increasingly will end up failing to protect people from companies but will almost always try to do the opposite, in blatant disregard for their purpose and oaths.

Also, much of the workers rights we have today are because of workers pushing back against such tactics. I feel like the people have forgotten how we got to the 8 hour day we are at, and when we forget history we tend to end up repeating it.

https://en.wikipedia.org/wiki/Ludlow_Massacre

rayiner9• 11 years ago

The opinion vacating Aleynikov's convictions is here: http://www.ca2.uscourts.gov/decisions/isysquery/4ad04a2b-c61....

"Aleynikov’s last day at Goldman was June 5, 2009. At approximately 5:20 p.m., just before his going-away party, Aleynikov encrypted and uploaded to a server in Germany more than 500,000 lines of source code for Goldman’s HFT system, including code for a substantial part of the infrastructure, and some of the algorithms and market data connectivity programs." [Page 5].

"Aleynikov also transferred some open source software licensed for use by the public that was mixed in with Goldman's proprietary code. However, a substantially greater number of the uploaded files contained proprietary code than had open source software." [Page 5, Footnote 1].

He was convicted for violating the NSPA (National Stolen Property Act) and the EEA (Economic Espionage Act). The conviction for the former was vacated because the Second Circuit construed the NSPA not to extend to intangible property. [Page 18-19]. And the EEA conviction was vacated because the statute requires the product to be "produced for" or "placed in" interstate commerce, while Goldman never intended to sell or license the software. [Page 27].

The Court concluded that he had in fact tried to take 500,000 lines of valuable and mostly proprietary source code, but that his conduct didn't fall within the reach of the two laws charged in the indictment. Solid legal analysis, but an ordinary person would say that he got off on a technicality. Which is fine--if you can lawyer your way out of a conviction, you deserve to.

But help me understand what the FBI did wrong, or Goldman for that matter. The legal questions that were resolved in Aleynikov's favor were subtle ones. How would additional investigation on the part of the FBI have helped? And what exactly did Goldman do wrong in reporting him?

rev_bird2• 11 years ago

I think the most troubling part was that a huge, powerful company can get a government agency on the phone and have someone locked up based pretty much exclusively on them saying "You won't understand why, but he did really bad stuff. Trust us."

trhway• 11 years ago

But help me understand what the FBI did wrong, or Goldman for that matter.

What law Goldman reported violation of? What law FBI investigated violation of? While one can report some alleged violation of some law, the FBI is aware of laws, especially the laws the FBI is assigned to enforce. Bringing charges under obviously un-applicable here NSPA and EEA instead of whatever (if any) law may have been applicable here is a gross negligence, to say the least, on behalf of FBI. As a result, they wasted a lot of valuable (taxpayer) resources and ultimately let the criminal (if there was real crime committed) go free.

The legal questions that were resolved in Aleynikov's favor were subtle ones.

are you kidding? How a subtle legal question(s) can be summarized in one paragraph on an Internet forum?

j_baker• 11 years ago

What Aleynikov did was clearly slap-on-the-wrist-worthy. It's not like he took code and sold it to the highest bidder for zillions of dollars. It didn't merit depleting his entire life's savings and (almost) sending him to jail for many years. This was clearly about more than merely the value of the code he took.

The Court concluded that he had in fact tried to take 500,000 lines of valuable and mostly proprietary source code

I would dispute the value of the code. The code he took wasn't part of the "secret sauce". It didn't contain any of the logic for actually making High-speed trades.

nikanj• 11 years ago

Blergh, almost half of my screen real estate is taken up by the top bar. I bet somebody got a bonus for that, as Raymond would say.

abalone8• 11 years ago

I'm new to this but after reading up on the background I think this case is being somewhat mischaracterized in the comments here. I know we are all anti-authoritarian hackers at heart but HN also stands for accuracy and fairness.

I would say the general tone here is "jack-booted FBI thugs falsely arrest hacker because their pal at Goldman Sachs pulled some strings". The implication being that this has all unravelled and he is now suing the government for corrupt trampling his constitutional rights.

After reading up, I would say a fairer characterization is "guy who got caught stealing proprietary code got off on a technicality because the law doesn't actually cover HFT code due to shortsighted phrasing".

Before you hit that downvote button, here's my support: the judge who overturned it called this out and Congress passed a law in 2012 to close the loophole through which he got his conviction overturned.

From the Congressional Record[1]:

Quoting the appeals court, "just before his going-away party, Aleynikov encrypted and uploaded to a server in Germany more than 500,000 lines of source code for Goldman's HFT system ..... On June 2, 2009, Aleynikov flew ..... to Chicago to attend meetings at Teza. He brought with him a flash drive and a laptop containing portions of the Goldman source code. When Aleynikov flew back the following day, he was arrested by the FBI .....''"

In his concurring opinion, Judge Calabresi [Cal-abress-E] directly called upon Congress to clarify the scope of the EEA [Electronic Espionage Act] as he wrote:

[I]t is hard for me to conclude that Congress, in [the EEA], actually meant to exempt the kind of behavior in which Aleynikov engaged ..... [n]evertheless, while concurring [in the opinion], I wish to express the hope that Congress will return to the issue and state, in appropriate language, what I believe it meant to make criminal in the EEA.

Specifically the EEA used to say "included in a product that is produced for or placed in" interstate commerce, which the court thought didn't technically cover HFT code, and now reads "a product or service used in or intended for use in". That's it. That's the loophole.

If there ever was a case of violating the spirit, but not the letter of the law, this is it.

[1] http://thomas.loc.gov/cgi-bin/query/z?r112:H18DE2-0051:

Lewton2• 11 years ago

I really recommend you read the vanity fair article posted earlier.

http://www.vanityfair.com/news/2013/09/michael-lewis-goldman...

It is quite clear that he did not violate the spirit of the law. There was no clear intent to steal any "trade secrets" from Goldman Sachs, and the analogy brought up in the last part of the article that compares it to taking home a notebook you've used for scribbling down thoughts after you've quit your job, is apt

abalone8• 11 years ago

"It is quite clear that he did not violate the spirit of the law."

Very, very clearly, everyone from the legislature to the judiciary is in agreement that he violated the spirit of the law.

Even the judge who overturned the conviction said it was hard for him to believe that Congress didn't mean for the law to make his actions criminal. And then Congress immediately updated the letter of the law, unanimously, all the while explaining how it's unfortunate the previous letter of the law didn't capture the spirit of what they intended, specifically mentioning this case.

Also, the "it's just a notebook with scribbled down thoughts" analogy is poor. That implies that it's just his own thoughts he took. He uploaded 500,000+ lines of source code, then tried to cover up his tracks. That is exfiltrating extensive, proprietary trade secrets and was repeatedly cited by Congress as just the sort of activity they wished to criminalize in the Economic Espionage Act.

By the way, I don't think he should serve any more time. The sentence was too harsh IMO. But there is no question it is (now) illegal activity, because Congress specifically updated the law to make his exact actions illegal, naming him personally.

(Of course, they weren't technically illegal at the time he did them, according to the appellate court, which is why he was set free.)

kyrra• 11 years ago

What exactly was the code that he copied? I see that he did copy a bunch of code out for the purpose of collecting open-source code... but if it was code he or others wrote at his previous company, taking it seems like a bad idea.

datashovel• 11 years ago

I think Goldman Sachs was more worried that he was taking his brain with him to a competitor. The banking cartel certainly has to be high on Silicon Valley's list of "industries that need to be disrupted". The sad thing is he's probably being prosecuted for things he created within the walls of Goldman Sachs and could probably easily re-create from scratch without them.

harry8• 11 years ago

Can I just make sure that someone mentions the most powerful motive that a shop like GS would likely have?

HFT barrier to entry is expertise. Any firm has as their biggest competitive risk their employees setting up with that expertise in competition. It happens all the time. To counter that the optimal strategy of an HFT shop where an expert resigns is to sue them as far and deep into the ground as they can why?

As a lesson to all remaining staff

This gets an HFT shop additional barrier to entry from competition from existing experts, their own.

Did GS deliberately follow this optimal tactic? I don't know, I have no evidence. Maybe the fact it is optimal for other reasons is unrelated and possibly even unknown to them. Form your own opinion on the balance of probabilities there.

abalone8• 11 years ago

Couple points:

1. They didn't sue him. They complained to the FBI and the government criminally prosecuted him for violation of the Economic Espionage Act.

2. The basis of the prosecution was that he exfiltrated 500,000+ lines of source code.

Doubtful this particular "tactic" could be more generally applied unless staff are engaging in similar activities now clearly prohibited under the EEA.

seesomesense• 11 years ago

Would you employ Sergey ?

chrisbennet2• 11 years ago

Except of Flash Boys book from from the Vanity Fair article: http://www.vanityfair.com/news/2013/09/michael-lewis-goldman...

"He agreed to hang around for six weeks and teach other Goldman people everything he knew, so they could continue to find and fix the broken bands in their gigantic rubber ball. Four times in the course of those last weeks he mailed himself source code he was working on. (He’d later be accused of sending himself 32 megabytes of code, but what he sent was essentially the same 8 megabytes of code four times over.) The files contained a lot of open-source code he had worked with, and modified, over the past two years, mingled together with code that wasn’t open source but proprietary to Goldman Sachs. As he would later try and fail to explain to an F.B.I. agent, he hoped to disentangle the one from the other, in case he needed to remind himself how he had done what he had done with the open-source code, in the event he might need to do it again. He sent these files the same way he had sent himself files nearly every week, since his first month on the job at Goldman. “No one had ever said a word to me about it,” he says. He pulled up his browser and typed into it the words: Free Subversion Repository. Up popped a list of places that stored code, for free, and in a convenient fashion. He clicked the first link on the list. The entire process took about eight seconds. And then he did what he had always done since he first started programming computers: he deleted his bash history. To access the computer he was required to type his password. If he didn’t delete his bash history, his password would be there to see, for anyone who had access to the system."

Sergey Aleynikov Sues FBI Agents Who Arrested Him

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