Trading Model Theft: Goldman Sachs Scrambling After Breach
Goldman Sachs Group, Inc. is currently doing damage control after learning that one of its former computer programmers, Sergey Aleynikov, allegedly made off with highly sensitive computer code comprising Goldman Sachs' latest trading model. A trading model consists of a series of algorithms that temporally optimize risk. The model dictates investment strategy and transactions are made accordingly. This entire process is referred to as automated trading.
A trading model constitutes key intellectual property and enables investors to make moves more quickly than more traditional means. Automated trading has become more and more popular as it has yielded huge profits for investment banks. Higher levels of speed and volume confer a considerable competitive edge, so banks seek to create models that execute trades as quickly as possible. Million dollar transactions can take place less than a second!
What’s surprising about Goldman Sachs’ predicament is that the theft was allegedly perpetrated by a programmer, and not a high-level trader. In addition, Aleynikov is accused of stealing actual computer code as opposed to memorizing the platform and drafting a new, copycat version. This indicates that companies must identify potential leaks from every angle and take a variety of precautions.
I wonder if Goldman Sachs had confidentiality agreements with its employees. With rogue former employees like Aleynikov, it may not have made a difference, since he probably doesn't have the assets to compensate Goldman Sachs for their financial losses and business advantages. I also wonder if there were non-compete agreements in place, preventing former employees from running off to work for a competitor, or start their own business. Furthermore, I wonder how much of Goldman Sachs' information could have been protected under trade secret laws, where minimizing the exposure of these secrets to employees would offer them the best protection.
Are you a business whose assets are in intellectual property? Do you have special skills, customer lists, or processes you don't want your competitors to have? An intellectual property lawyer with a strong foundation in business law can help you cover all your bases!
