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Goldman Sachs High-Speed Trader Trial|Wraps With Defense Cry of ‘Bogus, Bogus’

MANHATTAN (CN) - During summations Thursday in the trial of former Goldman Sachs programmer Sergey Aleynikov who is accused of swiping proprietary high-frequency trading code, prosecutors repeatedly called the defendant a "thief" while the defense attorney said the government "should be ashamed" of making charges that are "bogus, bogus, bogus."

Both summations started with the sentence "Let's move fast," the subject line of an e-mail sent by Teza Technologies founder Mikhail Malyshev - Aleynikov's new employer after Goldman - urging Teza's new programmers to build a high-frequency trading platform quickly.

The e-mail, which Malyshev testified he wrote as a "pep talk," ended with the line, "The future is ours to own and the game is already on."

High-frequency trading software, by definition, moves fast and consists of computer algorithms programmed to place trades as market data gets processed through its system.

One Goldman Sachs witness testified that companies competing through this technology struggle to get an edge of a millionth of a second by placing computers close to the stock market.

In the government's summation, prosecutor Rebecca Rohr said that, under pressure from his new boss, Aleynikov "chose to become a thief, a high-tech thief" and downloaded Goldman Sachs' proprietary software the next day.

Defense attorney Kevin Marino countered that "Let's move fast" better describes the speed at which the government prosecuted his client at the behest of Goldman Sachs.

"It's a great phrase," Marino said, adding, "That's exactly what the government did."

FBI Special Agent Michael McSwain said he was convinced within two days of arresting Aleynikov that the programmer had stolen trade secrets.

Agents, including McSwain, picked up Aleynikov at Newark Airport on July 1, 2009. Aleynikov, who had just returned from a meeting with Teza in Chicago, behaved like a "gentleman" during his interrogations, McSwain said.

In a motion dated Dec. 6, 2010, the government sought to exclude evidence that McSwain is a Goldman Sachs shareholder. The agent's 50 shares of stock cited in the court document were never mentioned before a jury.

Neither side disputes that Aleynikov downloaded portions of Goldman's high-frequency trading software that included the company's proprietary code as well as open-source material, which belongs to the public, programmed into it.

When called as a government witness, Goldman Sachs director Paul Walker said that company policy calls to keep proprietary software and open-source code segregated.

Marino says that this is because open-source software puts proprietary code at "a risk of contagion." The defense claims Aleynikov only wanted to locate the open-source materials in his downloads to use in a new project.

Both sides acknowledge that Aleynikov's downloads breached a confidentiality agreement, but Marino said the Goldman confidentiality agreement is so far-reaching that if a programmer seeks to ever work again, "You can't not breach that policy."

Rohr said that the programmer wanted to use Goldman Sach's "battle-tested, robust, resilient" code, programmed over "decades," to benefit his new employer, Teza.

But Marino said that the founder of that company testified that he would not have accepted Goldman's complete high-frequency trading system if given to him freely.

Under cross-examination, Malyshev said, "Goldman Sachs is good at trading options, but trading high frequency in the products we trade, I don't think they are good."

On redirect, prosecutor Joseph Facciponti claimed that Malyshev's assessments were "meaningless" because he is not a programmer.

Marino mocked the government's expert witness, Benjamin Van Vliet, an IIllinois Institute of Technology professor who described Goldman Sach's high-frequency trading platform as a "hot rod, built for speed."

Marino said the platform was "crushed" by the system programmed by Malyshev's former hedge fund, Citadel.

He also derided Van Vliet as "a lawyer's fantasy," for comparing of Goldman's software to NASCAR star Jimmie Johnson, Knicks Hall of Famer Patrick Ewing and the New York Yankees.

"Guess what? It's nonsense," Marino said.

The best defense of his client, Marino said, came from sworn statements Aleynikov made directly to the FBI after waiving his rights to remain silent and retain an attorney.

In the late evening of July 3, 2009, Aleynikov wrote the FBI: "On or about June 5, 2009, I created a tarball in an effort to collect open source work on Goldman Sach's server to which I had no account."

Aleynikov came up with his own "brilliant defense" on his own, "without the benefit of counsel," Marino said.

Whereas both prosecutors delivered methodical summations from behind a podium positioned in front of jurors, Marino strode the length of the courtroom in animated defense of his client and indignation at the prosecutors.

"I listened in absolute horror to that summation," Marino said.

He particularly bristled at the prosecutor invoking a civil lawsuit filed by Merv Griffin Enterprises against Aleynikov in 1997, which ended in an injunction barring him from disseminating a video game based on "Wheel of Fortune."

"Isn't that beneath the dignity of a United States Attorney with all the dignity and majesty of a federal courtroom?" Marino asked, noting that Aleynikov is not charged with any improprieties resulting from it. He added that prosecutors hid behind "weasel words" to try to smear his client by the association.

Marino added prosecutors tried to "paint him like a criminal" and tried to "inject some international intrigue" by pointing out that he used a server based in Germany. He said a German investigator did not at first know that the server was based in the country and had to check to make sure he had the proper jurisdiction.

Grabbing his client's shoulder, Marino thundered, "This is Sergey Aleynikov, the human being. He's not some file."

He ended with a bitter recrimination of the prosecutors, saying, "This is bogus. Bogus, bogus, bogus, and they should be ashamed."

In September 2010, U.S. District Judge Denise Cote dismissed one charge against Aleynikov, leaving theft of trade secrets and interstate transportation of stolen property.

If he is convicted on these charges, Aleynikov could spend up to 15 years in prison.

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