PERFECT $1OO MILLION+ DAYS FOR GOLDMAN FOR MONTHS IN A ROW!
RIGGED FOR THE TOP O.O1% ELITISTS!
425 BILLIONAIRES (LIKE FED MONEY) CREATED OUT OF THIN AIR!
INEQUALITY GONE WILD!
Michael Lewis = High frequency trading (HFT) = “That’s why they were able to trade for five years without losing money on a single day” = Profits by automatically reading YOUR ORDERS and JUMPING AHEAD OF YOU to WIN $Millions at the expense of ALL doing buys and sells.
LONDON-SWISS-NEW YORK CITY ROTHSCHILDS BANKSTER CRIME SYNDICATE RUNS WILD WITH AUTOMATED $100 MILLIONS PER DAY FRONT RUNNING & MANIPULATION SCAMS ON CLIENTS & INVESTORS!
Michael Lewis Shakes Up Wall Street = “Flash Boys” = high-frequency trading = microsecond advantages on automated TRADES. = “I think that in this case, I have lighting in a bottle.”
A story for Vanity Fair = A programmer who was jailed for stealing code from Goldman Sachs. “The next crisis.” = “Losing control of their algorithms.” = “dark pools” = “latency arbitrage.”
The serendipitous timing of a GOV push to regulate high-frequency trades.
NY Attorney General Schneiderman speech on “Insider Trading 2.0,” a new plague of Wall Street sleaze” = Flash trading = Broad investigation into “this new breed of predatory behavior.” = BOOK WILL “add to the important, increasingly urgent conversation about the unfair advantages provided to some high-frequency traders.”
“The Responsible Way to Rein in Super-Fast Trading.” — COO of Goldman Wall Street Journal op-ed 2 DAYS LATER = Makes you wonder what Lewis and Schneiderman and GOLDMAN knew about each other’s efforts.
Flash Trading: Goldman Front Running Everyone Else
A private club of a FEW high frequency traders (HFT) with access to your Trade Info = “select few” = front-run “every-one else” including YOU.
HFT generates profits of over $20 Billion.Year (2009)
GOLDMAN = Where are the Proper authorities who LET IT RUN = Direct Edge’s Enhanced Liquidity Provider (ELP) program + NYSE’s Supplemental Liquidity Provider program (aka, the Goldman (GS) kiss)
NYSE’s own Larry Leibowitz who raised the most ruckus about the potential abuse of the ELP program. = “flash” orders = Leibowitz, hot-under-the-collar from the Big Board…The head of US execution and global technology at NYSE Euronext assailed Direct Edge’s Enhanced Liquidity Provider or ELP program as the “enhanced look” program, comparing it to the advance look at orders that NYSE specialists used to get.
ELP = Giving FEW Specialists unfair Advantages over other market participants = Disadvantaging order senders.
Goldman = Record quarterly profit on FRONT RUNNING FLASH TRADING = $BILLIONS IN GUARANTEED LOOTING OF OTHERS = Most powerful weapons are ALGORITHMS on high-powered computers in JERSEY. Goldman’s supercomputers = Detect TRADES and Place orders to GET NANO-PROFITS.
Algorithms = Mathematical formulae = Corporate Secrets = Devise to FRONT RUN their Clients and other SUCKERS by AUTOMATICALLY READING THEIR ORDERS IN THE QUEUE and AUTOMATICALLY putting GOLDMAN ORDERS AHEAD of CLIENTS to GRAB THE GAINS in NANO-SCAM = GOLDMAN DREAM COME TRUE! Computers = CHEATING TRADERS = High Frequency Trading.
GOLDMAN = MARKET MAKER EXCUSE = Base ORDERS on CLIENT TRADES they receive a fraction of a second before the rest of the world does. = “This kind of unfair access seriously compromises the integrity of our markets and creates a two-tiered system where a privileged group of insiders receives preferential treatment, depriving others of a fair price for their transactions.” — Sen. Charles Schumer (D-NY)
Goldman = Has access to non-displayed information to set the prices for a stock or FRONT RUN their Client
Michael Lewis: Goldman Oversteps in Criminally Charging Its Ex-Programmer = Ace programmer Sergey Aleynikov (SA) left Goldman = Arrested = FBI + JURY which convicted him a year later = DID NOT UNDERSTAND THE CASE = Goldman accused him of stealing computer code = 8 years in federal prison = Detention centers tend to be freezing cold, even in summer, and so if you happen to be wearing shorts or short sleeves you’re in for a spectacularly unhappy nights.
SA had no sense anything was wrong = his life had never been better = a new job at a hedge fund that paid him a $Million/Year = Just moved into a big new house of his own design = perfect home.
Flight from Chicago he’d slept = Leaving the plane he noticed three men in dark suits, waiting in the alcove of the Jetway = They confirmed his identity, explained they were FBI = Handcuffed him = He was genuinely bewildered. = FBI refused to tell him his crime. = They finally told him his crime: stealing computer code owned by Goldman. FBI marched Serge into a black town car and drove him to FBI in Lower Manhattan and led him into a tiny interrogation room, handcuffed him to a rod on the wall, and, finally, read him his Miranda rights.
April 2009 Serge accepted a job at a new high-frequency-trading shop called Teza Technologies, but remained at Goldman for the next six weeks, until June 5 = So-called “subversion repository,” 32 megabytes of source code from Goldman’s high-frequency stock-trading system.
Website Serge used (“subversion” in its name) FBI found highly suspicious. = Serge used a site not blocked by Goldman. FBI wanted him to admit he had erased his “bash history”of commands he had typed into his own Goldman computer keyboard.
FBI didn’t seem to know anything about high-frequency trading or source code. Serge had no idea where the “subversion repository” was physically located. = A place on the Internet used by developers to store the code they were working on. FBI sounded like they were repeating phrases that he’d heard from others but actually meant nothing. Goldman discovered his downloads a few days earlier and called the FBI in haste = Put agents through a crash course on high-frequency trading and computer programming. = NO independent expert advice = Just GOLDMAN. = FBI had no idea of the value of the code but Goldman said it was worth a lot of money = Trade secrets based on Goldman. = FBI investigators trusted Goldman on some extremely complicated stuff = 48 hours after Goldman called the FFI Serge was arrested = NO arrest warrant = Serge waived his right to call a lawyer. He phoned his wife and told her what had happened and that a bunch of FBI agents were on the way to their home to seize their computers, and to please let them in = NO search warrant
Serge politely tried to clear up the FBI’s confusion. What he’d done was trivial but FBI claimed he violated the Economic Espionage Act of 1996 + the National Stolen Property Act = Serge thought if the FBI understood how high-frequency-trading worked, the matter would be quickly cleared up. = “was nothing there”
FBI kept saying, ‘If you tell me everything, I’ll talk to the judge, and he’ll go easy on you.’ = FBI had a very strong bias from the very beginning. FBI goals to fulfill = Obtain an immediate confession.” FBI chief obstacle to its ability to extract a confession wasn’t Serge’s willingness to provide it but ignorance of what Serge was saying. FBI was not correct = FBI sent a giddy one-line e-mail to the US Attorney’s Office: “Holy crap he signed a confession.” = Two minutes later he dispatched Serge to a cell in the Metropolitan Detention Center. = Denied bail
Goldman said SERGE had in his possession computer code which in the wrong hands could be used “to manipulate markets in unfair ways.” = GOLDMAN ADMISSION IT MANIPULATES MARKETS!
Serge’s SO-CALLED signed confession — scarred by phrases crossed-out and re-written by the FBI agent — Was presented by prosecutors to a jury as the work of a thief who was being cautious, even tricky, with his words. = Serge SAID “The document was being crafted by someone with no previous expertise in the matter.”
Serge signed confession was the last anyone heard from him, at least directly. He declined to speak to reporters or testify at his trial. SERGE’s funny accent, a beard, and a physique painted by El Greco = the guy most likely identified as a Russian spy. = Tendency to speak with extreme precision = Mind-numbing to a lay audience. = Serge kept his long silence even after he was sentenced, without the possibility of parole, to eight years in a federal prison.
“All of Serge’s life before he got into prison was some kind of mirage. Or a dream. He was not aware of things. He liked slender girls who loved to dance. He married a girl and manages to have three kids with her before he figures out he doesn’t really know her. He was working his ass off, and she would spend the money he was making. He would come home, and she would cook him vegetarian dishes. He was serviced, basically.”
Serge interviewed Goldman = Put Serge through a series of telephone interviews, then brought him in for a long day of face-to-face interviews. = Extremely tense, even a bit weird. A dozen Goldman employees tried to stump him with brainteaser, computer puzzles, math problems, and even some light physics. It become clear Serge knew more things than did his interviewers. = Goldman invited him back for a second day. He wasn’t all that sure he wanted to work at Goldman. = “But the next morning I had a competitive feeling. I should conclude it and try to pass it because it’s a big challenge.” He fit in = 50% of the programmers were Russians = The best programmers on Wall Street = Serge knew why = forced to learn programming without the luxury of endless computer time. = learned to write code that minimized the amount of debugging. = Think about it a lot before you committed it to CODE = type it and maybe erase it 10 times. = the experience of limited access to computer time.
Serge was grilled by Goldman’s office of high-frequency traders = starting salary plus bonus came to $270,000 in 2007. Serge joined Goldman at moment in history when their bond-trading department was aiding and abetting a global financial crisis, most infamously by helping the Greek government to rig its books and disguise its debt + Designing subprime-mortgage securities to fail SCAM = BETTING against their CLIENTS. + Goldman’s equities department was adapting to radical changes as US stock market was about to crash. “Dark pools,” were growing at Goldman. + SEC Reg NMS was created new ways for brokers to abuse their clients = Clients’ orders were sent to exchange offers the best price = stimulated a huge amount of stock-market trading by extremely fast computers = High-frequency-trading at Goldman = The more market there were to trade stocks, the greater the opportunity there was for high-frequency traders to interpose themselves between buyers on one exchange and sellers on another. = Perverse and INCREASED SCALPING of CLIENTS. A boom in MIDDLE MAN financial take for Wall Street = $10 to $20 Billion/ Year = Goldman HFT practice is hidden on their balance sheets = NO ONE KNOWS = One high-frequency trader is paid $75 Million/Year in cash = Misha Malyshev in 2008 and QUITS. = A war of FAST robots. = There was easy money to be made FAST and FLASHY! = Goldman good news = $Billions to be made by stock-market MIDDLE COMPUTERS (NOT MEN). = Goldman ’s robots were slow at winner-take-all trading = Serge Aleynikov
Goldman’s 2008 system, in Serge’s view = amalgamation + OLD and Obsolete + massive and clumsy old software (60 million lines of code) + SLOW COMMUNICATIONS = Giant rubber-band ball. = Trades going through layers and layers of corporate switching equipment.
Serge Told Goldman to SCRAP its high-frequency-trading platform and build a new one from scratch. His bosses SAID NO! = Make money right away NOW = Something long-term, they weren’t interested. = Just KEEP patching the existing HARD TO MAINTAIN system (ELEPHANT), constantly. Serge maintaining the elephant for 2 YEARS.
“I think the engineering problems are much more interesting than the business problems. Finance is just who gets money.
Goldman wins the game by receiving the hints = New trading strategies/algorithms, for the robots to execute = Not that CLEVER or shrewd. Goldman algorithms = Some sort of prediction one second into the future. Day after 2008 CRASH Goldman’s supposedly brilliant traders were losing tens of $Millions/DAY. = Goldman thought they controlled the market = An illusion = GAMBLING
Serge preferred the deterministic world of programming to GAMBLING = Goldman traders were obsessed with the ROBOT speed Serge created for them BUT BY shaving off half a millisecond HAD NO REAL ADVANTAGE = Studies showed.
SERGE made Goldman’s robots faster BY decentralizing Goldman’s system = Bypass signals to the Goldman hub = He set up separate mini Goldman hubs inside each of the exchanges. To patch the old code Serge and others resorted to open-source software available free to anyone for any purpose = Open source idea depended on collaboration and sharing = Serge adapted it to financial markets and to Goldman’s ancient plumbing. = Goldman was a heavy USER of open source but NEVER added back to open source. = BOSS “said it was now Goldman’s property.” = so selfish = “You don’t create intellectual property. You create a program that does something.” GOLDMAN SAID NO! = Everything there is very possessive.
Serge’s reputation among corporate recruiters outside Goldman = The best programmer in the firm. = 20 guys on Wall Street like Serge “And he was one of the best, if not the best.” = Goldman programmers tended not to know their true worth. Different room from the traders who KNEW the bigger picture. Serge is a narrow problem solver. = A few months into his new job, headhunters were calling him every other week. In early 2009 he had another call, with a very different kind of offer: to create a trading platform from scratch for a new hedge fund run by a 39-year-old Russian. Serge wanted to create a new platform, rather than constantly patching an old one. + Paid him more than a million dollars/year – near his home in New Jersey. Serge “told (Goldman) it wasn’t the money. It was the chance to build a new system from the ground up.” = Serge agreed to hang around for 6 weeks and teach other Goldman people everything he knew. 4 times in the course of those last weeks he mailed himself source code he was working on.= Later accused of stealing 32 megabytes of code (actually 8 MB – a lot of open-source code he had worked with, and modified = open source. He sent these files the same way he had sent himself files nearly every week at Goldman. “No one had ever said a word to me about it.” = The entire process took about eight seconds. And then he did what he had always done since he first started programming computers: he deleted his history to protect his password. “I knew that they wouldn’t be happy about it.”
Trial of Serge Aleynikov = 10 days with almost NO informed outsiders. Jury = Mainly high-school graduates = ZERO experience with programming computers. Computer into the courtroom + pulled out the hard drive and show it to the jury. As evidence
Serge’s new employer had knowledge of high-frequency trading = testified that Goldman’s code was of no use whatsoever in the system he’d hired Serge to build = NEW system from scratch = Flexible and fast + Continuously upgrade. = 50% of Jury WAS sleeping.
A NEW PRETEND TRIAL BY EXPERTS
Experts were surprised Serge had “super-user status” inside Goldman (45 people or 32,000 employees) an administrator to the system = SERGE at any time he could use a cheap USB flash drive to take all of Goldman’s computer code, without anyone having any idea that he had done so. = lots of thieves are sloppy and careless + they all agreed there wasn’t anything suspicious or nefarious about the way he stored code and deleting your history = Common practice = NOT a man trying to cover his tracks.
Serge taking files to later parse out the open-source code —made complete sense to the new jurors. It was entirely plausible to them that Serge’s interest was confined to the open-source code because that was the general-purpose code that might be re-purposed later.
Goldman possibly violated the original OPEN-SOURCE Free licenses by NOT returning the improvements to publicly share.
Goldman proprietary code was written specifically for Goldman’s platform = NO VALUE in any new system he wished to build.
Jurors were all shocked that from the day he arrived at Goldman Serge had been able to send Goldman’s source code to himself weekly without anyone at Goldman saying a word to him about it. JURORS were surprised by how little he had taken in relation to the whole: eight megabytes in a platform that consisted of an estimated one gigabyte of code. The most cynical among them were surprised mostly by what he had not taken. JURORS AMAZED SERGE NEVER TOOK THE STRATS (Derivatives) = the secret sauce = the jewelry box without the jewels
“I think passion plays a big role. The moment he started talking about coding his eyes lit up. The fact that he kept trying to work on open-source shit even while he was at Goldman says something about the guy.”
They didn’t all agree that what Serge had taken had no value, but what value it might have had in creating a new system would have been trivial = USELESS TO ANOTHER SYSTEM. = “Goldman’s code base is like buying a really old house. New firm was going to build a new house so why take 100-year-old copper pipes.
Why did Serge take anything at all? He never touched the code he had taken. It was useless outside Goldman = For programmers their code is their spiral notebook to remember what they worked on…but has very little relevance to what they will build next. He took a spiral notebook that had very little relevance outside of Goldman Sachs.
The real mystery, to the insiders = Was why Goldman had done what it had done. Why call the FBI + Why coach your employees to say what on a witness stand to maximize the possibility of sending him to prison + Why exploit the ignorance of JURY + Legal system about complex financial matters to punish this one little guy?
Nature of Goldman these days = Goldman pretends their team can’t be replicated. = 95% open-source code = Kills that perception. SO Goldman can’t say, ‘No big deal’ – They have to pretend to CARE to SCARE OTHERS! + Goldman Bonuses! = One juror said, “I’m actually nauseous. It makes me sick.”
“Why aren’t you angry?” = Serge just smiled back at him “But what does craziness give you?…What does negative demeanor give you as a person? It doesn’t give you anything. If you know that you’re innocent….To some extent I’m glad this happened to me. I think it strengthened my understanding of what living is all about.”
A year after prison the appeal was finally heard = The judges ordered Serge released, on the grounds that the laws he stood accused of breaking did not actually apply to his case.
A few months Serge was arrested again and taken to jail. A few days later the Manhattan D.A., Cyrus Vance Jr., sent out a press release to announce that the state of New York was charging Serge Aleynikov with “accessing and duplicating a complex proprietary and highly confidential computer source code owned by Goldman.” The only employee of Goldman to go to jail in the aftermath of the financial crisis was the employee Goldman Sachs wanted sent to jail, for taking something from Goldman. To avoid double jeopardy, the Manhattan D.A.’s office had found new crimes with which to charge Serge for the same actions. “They want him to plead guilty and let him go on time served. I told them in the politest terms possible that they can go fuck themselves. They ruined his life.”
Serge lost many fears. Your life can end any day at any time. So why worry? There is life in prison + you become very much independent of material property and learn to appreciate very simple pleasures in life such as the sunlight and morning breeze.
GOLDMAN RESPONDS We spent $Millions and tens of thousands of hours developing the proprietary source code and technology used in our market-making business. + Extensive safeguards to protect this valuable technology + Contractual limits on disseminating confidential information + Firm restricts access to proprietary technology to those employees whose duties designing and maintaining the technology require such access. Sergey minutes before his going-away party, “encrypted and uploaded to a server in Germany more than 500,000 lines of source code for Goldman’s HFT [high-frequency-trading] system.” = the Court determined that “a substantially greater number of the uploaded files contained proprietary code.” — code “could be integrated into a competitor’s system” + Mr. Aleynikov then “deleted the encryption program as well as the history of his computer commands.”
THANKS TO CAROLAB FOR THIS FOLLOWUP TO THE CASE!
Serge was scapegoated for doing what every Wall Street Banker or Techie does = saves their years of work: While unethical, preserving their years of labor product is a normal Human Instinct.
Goldman spends $Millions (at $1,000 / Hour/Attorney) to prosecute a person for this behavior when they use AUTOMATED FRONT RUNNING to ROB THEIR CLIENTS LIKE THEY DID IN COOPERATION WITH JOHN PAULSON! + NO scruples for receiving trade secrets of other firms (Credit Suisse sued employee going to Goldman for database of clients). + Goldman admitted in 2009 that they were able to “manipulate markets” using their software (OIL MARKET 2008).
Goldman + Banks = Love Unethical and illlegal behavior like pitching a client “AAA” MISREPRESENTED JUNK and then betting against the CLIENT’S PURCHASE to make $MILLIONS. + Enjoy endless coke, booze and prostitutes always funded by clients + Treating their “preferred clients” with free gambling trips + skiing + helicopter + industrial amounts of blow + cavorting with strippers and hookers = Encouraged debauchery like Libor fixing “conspiracy” = Potential future bumper revenue.
Goldman = HATES anyone backing up their work product = Goldman will PUT YOU IN PRISON AND RUIN YOUR LIFE! = Goldman demands only the Best prosecutors go after a gaunt, bearded Russian with a thick accent?
GOLDMAN = LOVES TWO-TIER JUSTICE
NYT reports Goldman bylaws say Goldman must pay all lawyer fees of employees charged in connection with their roles at Goldman = Serge is a “vice president.”
Judge Forced Goldman = PAY Legal Fees FOR Serge to fight the state case…+ Goldman pays for “reasonable fees” = $1.1 million + Pay $2.3 Million to fight Federal Case = $4 Million = Goldman can dispute.