Updates to our Terms of Use

We are updating our Terms of Use. Please carefully review the updated Terms before proceeding to our website.

Wednesday, June 19, 2024 | Back issues
Courthouse News Service Courthouse News Service

Trader Gets 3 Years for Code Theft

MANHATTAN (CN) - Former Société Générale trader Samarth Agrawal was sentenced Monday to 3 years in prison for stealing computer code for a high-frequency trading platform. A federal prosecutor and the judge called the trading platform a "money-making machine" at the sentencing hearing.

High-frequency trading software consists of computer algorithms programmed to place trades milliseconds faster than competitors.

Agrawal is the first federal defendant to be convicted of high-frequency code theft.

Agrawal's attorney Ivan Fisher said at the hearing that his client was not a thief because Société Générale gave him the code, and Agrawal intended to use it at his new job at Tower Capital Research for a different purpose.

Tower did not have the resources to use the Société Générale code as it was intended, Fisher said, claiming that Agrawal's actions did not cause Société "a blip" of harm.

"Nothing. Zero pecuniary damage. Zero harm," Fisher said.

But U.S. District Judge Jed Rakoff compared that argument to selling a company car to a used car salesman that specialized in a different model.

"My client didn't steal a car," Fisher said.

"No, he stole something infinitely more valuable," Judge Rakoff said, adding that the government's loss calculation was $9.58 million.

But Rakoff sentenced Agrawal to far less time than the term the government requested, which was 63 to 78 months.

During the 2½-hour hearing, the attorneys, judge and Agrawal engaged in lengthy philosophical debates about how to punish an unprecedented crime in a way that deters others, but is appropriate to the person being sentenced.

Fisher said of Agrawal, "This is a person who has very substantial claims to this court's mercy because of the way he conducted his life other than the conduct that has brought him here today."

Fisher added that Agrawal prays to a picture of his mother and grandfather in his cell and "feels remorse on a level that I have never known" in his decades of practice.

Prosecutor Thomas Brown acknowledged that before stealing Société Générale's code, Agrawal was a "generous and kind man." But he said that if Rakoff gave Agrawal a lenient sentence, other traders would be tempted to steal valuable computer software.

"Many people on Wall Street are watching, Your Honor," Brown said.

"I'm not sure that I agree with you, as a matter of human nature, that crimes are determined by a cold, cost-benefit analysis," Rakoff countered.

He added that the fact that Agrawal would be given a prison sentence, even one shorter than the government sought, would send a message to traders comparable to the first criminal conviction for antitrust violations in the 1970s.

Agrawal, a short, stocky and soft-spoken man, pleaded with the judge with two arguments, "from the heart" and "from the brain."

Drawing upon the judge's analogy, Agrawal said his crime could not be compared to stealing a car so much as a "trade secret" for making cars, on par with using Henry Ford's assembly line invention to make hamburgers.

Rakoff, unconvinced, said that the assembly line was not a "trade secret," but a method that Ford urged others to use.

Shifting to his emotional argument, Agrawal spoke about the pain he caused his parents, compounded by the "shame" of his knowledge that he acted alone, under nobody's supervision.

"What do you do when there is no light? When there is complete darkness? That's your character," Agrawal said.

Rakoff said that he was "more taken with the remarks from the heart. ... The parts from the head in the court's views were rationalizations."

U.S. Attorney Preet Bharara said in a statement, "Today's sentence confirms that theft of intellectual property by people like Agrawal is a serious, federal offense that can lead to substantial jail time."

Sergey Aleynikov, a programmer convicted last year of downloading Goldman Sachs' high frequency trading code, appealed in January, and sought a new trial. His bail was revoked Friday. He faces up to 15 years in prison at his March 18 sentencing.

Categories / Uncategorized

Subscribe to Closing Arguments

Sign up for new weekly newsletter Closing Arguments to get the latest about ongoing trials, major litigation and hot cases and rulings in courthouses around the U.S. and the world.