By now you've probably heard about former Goldman Sachs Group Inc. (NYSE:GS) employee and ballroom dancer Sergey Aleynikov being arrested for
allegedly stealing the computer codes for the firm's high-speed trading platform, but what could the theft actually cost the bank?
Well, if
prosecutors in the case are right, the tab could run into "millions of dollars from increased competition" if the software gets into the wrong hands. And quarter-over-quarter, that could really add up, but ...
If you delve deeper into the case, it turns out that there are some big holes in the argument that it could end up costing Goldman millions.
First off: Aleynikov only transferred 32 of 1,024 megabits of the software code to that server in Germany, which, by the way, he claims he didn't even know was located there. And usually, unless it's the server in your basement, no one knows where the server they're using is located.
Then there's the question: What would he do with it anyway? Even the Reuters journalist that first broke the story, Matthew Goldstein, had to admit that he couldn't have done much with the codes without Goldman's infrastructure to conduct the trades. Which debunks the theory that some day-trader is going to download the code off the Internet and suddenly implement it to start trading like Goldman.
There is one place where authorities probably do have him caught red-handed, though: his new job at Teza Technologies. That firm's founder, Misha Malyshev, once oversaw high-frequency trading at Citadel Investment, and prosecutors will likely argue that Aleynikov planned to use it at his new position to make a big splash. But if that was his plan, it was poorly implemented since he didn't download the entire code.
So in the end, it looks like the biggest cost to Goldman to come out of this is likely to be the overtime it pays its tech people to upgrade its security systems. -
George White
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But Tyler at Zero Hedge has described this as an issue of national security! Which could bankrupt Goldman! In the same way ETFs could bankrupt Credit Suisse and Switzerland!!!