Programmer Linked To Ex-Citadel Execs.’ Firm Indicted

Feb 12 2010 | 1:58pm ET

Seven months after his arrest for stealing proprietary trading software from Goldman Sachs, a former employee at a firm founded by three former Citadel Investment Group executives has been indicted.

Sergey Aleynikov has been charged with theft of trade secrets, transportation of stolen property in foreign commerce and unauthorized computer access, according to an indictment unsealed in New York yesterday. Aleynikov was arrested on July 3 at Newark Liberty International Airport after returning from a meeting at the Chicago offices of Teza Technologies, according to prosecutors.

Citadel has sued Teza’s founders, Mikhail Malyshev and Jace Kohlmeier, accusing them of violating non-compete agreements with the hedge fund giant. Malyshev was head of Citadel’s highly-profitable high-frequency trading unit, and Kohlmeier was his deputy.

Aleynikov has remained free on $750,000 bail since his arrest. He faces up to 25 years in prison if convicted.

Teza suspended Aleynikov following his arrest and has since fired the dual-Russian and American citizen.

According to prosecutors, Aleyniknov, who was a programmer at Goldman, transferred “substantial portions” of the Wall Street firm’s trading code to an outside server. He allegedly brought those files to Teza’s offices at the July meeting, although Teza denies that any of the Goldman code was uploaded to its computers.

“After transferring the files, Aleynikov deleted the program he used to encrypt the files and deleted the computers ‘bash history,’ which records the most recent commands executed on his computer” to cover his track,” U.S. Attorney Preet Bharara in Manhattan said.

Aleynikov’s lawyers have said that prosecutors “may be under a false impression” about his actions. But their efforts to persuade prosecutors to drop the charges came to nought.


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