|Nationality||Russia and United States|
Sergey Aleynikov is a former Goldman Sachs computer programmer. He emigrated from the Soviet Union to the US in 1990. Between 2009 and 2015 he was subjected to two consecutive prosecutions by NY Federal and NY State governments after his resignation from Goldman Sachs to join a competitive firm. Outcomes of both indictments resulted in the judgement of acquittal by the 2nd Circuit appellate and NY Supreme courts. The courts determined that both prosecutions were conducted without probable cause in violation of his Constitutional rights, and that he did not violate any of the Federal nor NY State statutes with which he was charged. His story inspired Michael Lewis's bestseller Flash Boys.
Aleynikov was employed for two years, from May 2007 to June 2009, at Goldman at a salary of $400,000. He left Goldman to join Teza Technologies, a competing trading firm which offered to triple his pay.
In May 2010, Aleynikov founded Omnibius, LLC, a consulting services firm for financial clients.
Federal arrest, trial and acquittal
On July 3, 2009, he was arrested by FBI agents at Newark Liberty International Airport after Goldman raised the alarm over a suspected security breach reported by Goldman on July 1st, 2009, two days prior to his arrest. He was accused by the FBI of improperly copying computer source code that performs "sophisticated, high-speed and high-volume trades on various stock and commodity markets", as described by Goldman. The events leading to his arrest are covered by Michael Lewis in his 2014 book Flash Boys. According to Assistant United States Attorney Joseph Facciponti, "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." Aleynikov acknowledged downloading some source code, but maintained that his intent was to collect open-source code. As this is a common practice among programmers, this is notoriously difficult to prove.[clarification needed]
In June 2010, Aleynikov filed a motion in the Federal Court to dismiss the indictment for failure to state a claim. He argued that the acts he was accused of didn't constitute a crime. The Federal Judge Denise Cote dismissed one charge against him but denied the rest of the motion.
In December 2010 Aleynikov had a jury trial in the United States District Court for the Southern District of New York, where the courtroom was sealed to public access several times. On December 10, he was convicted of the two counts of theft of trade secrets and transportation of stolen property. Later he was sentenced to 97 months (8 years) in prison, three years of supervised release following his prison sentence, and a $12,500 fine, despite the recommendation of the Federal Probation Service of suggesting a 24 month (2 years) sentence.
Three weeks before sentencing, Aleynikov was incarcerated on request of the government, as he was judged to be more of a flight risk after separating from his wife.
In March 2011, Aleynikov appealed the conviction, asking the Second Circuit to review the District Court's decision denying his original motion to dismiss the indictment for failure to state a claim.
On February 16, 2012, the United States Court of Appeals for the Second Circuit heard oral argument on his appeal and, later that same day, unanimously ordered his conviction reversed and a judgment of acquittal entered, with opinion to follow. Aleynikov was released from custody the next morning.
On April 11, 2012, Dennis Jacobs, Chief Judge of the United States Court of Appeals, published a unanimous decision in a written opinion stating:
On appeal, Aleynikov argues, inter alia, that his conduct did not constitute an offense under either statute. He argues that:  the source code was not a "stolen" "good" within the meaning of the NSPA, and  the source code was 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. We agree, and reverse the judgment of the district court.
In the course of these events, Aleynikov has spent a year in prison for crimes he didn't commit. Aleynikov has divorced, lost his savings, and, according to his lawyer, "[his] life has been all but ruined".
The government did not seek reconsideration of the Second Circuit's ruling, thus ending federal action against Aleynikov.
Later, on December 18, 2012, the law was changed by Congress, in order to cover similar acts in future rulings, in a law referred to as the "Theft of trade secrets clarification act of 2012".
New charges by the state of New York, trial, and acquittal
On August 9, 2012, Aleynikov was re-arrested and charged by Manhattan District Attorney Cyrus Vance, Jr. on behalf of New York state, with the offenses of "unlawful use of secret scientific material" and "unlawful duplication of computer related material" based on the same conduct. The state prosecution was initiated based on a signed complaint by the same federal agent, McSwain, who led the investigation of the failed federal prosecution. Aleynikov's lawyer, Kevin Marino, accused Goldman Sachs of being behind the government's aggressive prosecution of Aleynikov, and he sharply criticized the Manhattan District Attorney's office for charging Aleynikov after his federal conviction had been overturned and he had already served a year in prison.
On September 27, 2012, Aleynikov pleaded not guilty to both state charges and rejected the prosecutors' plea offer of accepting a single count offense and serving no jail time. On April 5, 2013, Aleynikov lost his motion to dismiss based on double jeopardy. In rendering the decision, New York State Supreme Court Justice Ronald Zweibel stated that Aleynikov's acquittal in federal court only precluded the federal government from retrying Aleynikov. The state of New York, as a separate sovereign, could continue pursuing charges against Aleynikov.
On June 20, 2014, upon reviewing the evidence, Justice Ronald Zweibel published a 71-page opinion in which the court ruled that the FBI "did not have probable cause to arrest defendant, let alone search him or his home." The arrest was "illegal", and Aleynikov’s "Fourth Amendment rights were violated as a result of a mistake of law." Besides finding that he was arrested illegally without probable cause, the court blocked the majority of evidence passed by the FBI to prosecutors at the NY State DA's office, as that property was supposed to be returned to Mr. Aleynikov upon his acquittal.
On May 1, 2015 following a trial before a New York state jury, he was acquitted of the "unlawful duplication of computer related material" charge. On July 6, 2015 Justice Daniel P. Conviser dismissed the two remaining charges of "unlawful use of secret scientific material" finding that as a matter of law Aleynikov did not violate that statute and that no rational jury could convict him of those charges. In his opinion he wrote:
The Court holds that, viewing the evidence in a light most favorable to the People, the prosecution did not prove the Defendant made a "tangible reproduction or representation" of secret scientific material as required by the statute. The Court also holds, again under the same evidentiary standard, that the People did not demonstrate Aleynikov had the "intent to appropriate ... the use of secret scientific material" as required by the law. Defendants cannot be convicted of crimes because we believe as a matter of policy that their conduct warrants prosecution.
NY State Appeal
On April 4th, 2016, almost nine months after Aleynikov was acquitted by the NY Supreme Court's decision, the Manhattan District Attorney Cyrus Vance's office filed an appeal seeking to reinstate the guilty verdict.
Defense attorney Kevin Marino sharply criticized Mr. Vance:
To re-prosecute Sergey Aleynikov – who was acquitted of all federal charges after spending a year in prison – was reprehensible; to file this baseless appeal eight months after Mr. Aleynikov was likewise acquitted of all state charges is truly inexcusable. Is no one watching how Mr. Vance spends the taxpayers' money?
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- THEFT OF TRADE SECRETS CLARIFICATION ACT OF 2012 – (House of Representatives – December 18, 2012)
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- United States of America v. Sergey Aleynikov Complaint
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- The Guardian
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- Did Goldman Sachs Overstep in Criminally Charging Its Ex-Programmer? by Michael Lewis, VanityFair
Conviction Overturned & Complete Acquittal