United States v. Aleynikov

676 F.3d 71 (2012)

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Nature of the Case

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Facts

D, a computer programmer, was employed by Goldman Sachs & Co. for developing computer source code for the company's proprietary high-frequency trading (HFT) system. HFT trading allows for a faster computer with privileged access to take advantage of the small amount of time to purchase shares ahead of a real trade, increasing the price and then selling the shares to the sucker who has a real trade just a few nanoseconds behind. HFT depends on computer programming and very fast computers along with being able to put your computer in the same room as the computers operated by exchanges. Goldman closely guards the secrecy of each component of the system and does not license the system to anyone. (This is double talk because all it depends on is privileged access and really good equipment) The computer programs that run HFT are not very different than any other program other than how they in fact front run the exchanges and submit many false trades to get a price on stock to move in the direction they want and then cancel the trades to make the real one they can make money on. In April 2009, D accepted an offer to become an Executive Vice President at Teza Technologies LLC, a Chicago-based startup that was looking to develop its own HFT system. D's last day at Goldman was June 5, 2009. At approximately 5:20 p.m., just before his going-away party, D 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. After uploading the source code, D deleted the encryption program as well as the history of his computer commands. When he returned to his home in New Jersey, d downloaded the source code from the server in Germany to his home computer and copied some of the files to other computer devices he owned. D brought with him a flash drive and a laptop containing portions of the Goldman source code to his new job. D was arrested by the FBI. D was charged with violating the EEA by downloading a trade secret and with violating the NSPA, which makes it a crime to 'transport, transmit, or transfer in interstate or foreign commerce any goods, wares, merchandise, securities or money, of the value of $5,000 or more, knowing the same to have been stolen, converted or taken by fraud. D moved to dismiss the indictment for failure to state an offense. The court denied the motion. The court held that the source code for Goldman's HFT system constitutes 'goods' that were 'stolen' within the meaning of the NSPA because, though source code is intangible, it 'contains highly confidential trade secrets related to the Trading System' that 'would be valuable for any firm seeking to launch, or enhance, a high-frequency trading business.' D was convicted and appealed. D argues that the source code is not 'related to or included in a product that is produced for or placed in interstate or foreign commerce' within the meaning of the EEA. As to Count Two, D argues that the source code--as purely intangible property--is not a 'good' that was 'stolen' within the meaning of the NSPA.