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Jul. 7 2009 - 1:04 pm | 163 views | 2 recommendations | 2 comments

High-powered tech start-up had tapped Goldman troublemaker

So now we know.The Chicago firm that hired the allegedly stole Goldman Sachs’ program trading protocol was a start-up owned by a former trader for mega-hedge fund Citadel Investments Group.  The high technology firm, called Teza Technologies LLC, is the brainchild of legendary high-frequency trader Misha Malyshev, who left Citadel in February.

The Russian born Malyshev may be one of the few people who could pose a threat to Goldman’s dominance in automated trading, which just also happens to account for the lion’s share of trading in the stock market. Bloomberg writes that Malyshev’s departure from Citadel  was particularly noteworthy since only his unit made money in 2008. The guy is a star.

Teza is putting a country mile between itself and Aleynikov’s shenanigans. And it’s certainly not discussing Aleynikov’s ginormous salary hike. Aleynikov had told the FBI that he expected to triple his pay of $400,000. Did Goldman not understand how valuable Aleynikov was or did Teva expect to get something very valuable? Teza has denied any knowledge of the alleged heist and has suspended the hapless Russo-American Sergey Aleynikov — without pay — after just one day work.

Aleynikov said he accidentally took the proprietary software that provides the keys to Goldman’s awesome program trading platform between June 1 and June 5. As I wrote earlier, it was one giant oops. He meant to take just open source software. Instead he sent 32 megabytes of the 1024 megabyte proprietary code to a server in Germany.

Reuters, which broke the story, reports that after uploading the software, the feds said that Aleynikov encrypted the files and then erased the encryption program. Why? Just a track-covering oops?

And here’s something for those of you who enjoy conspiracy-style theorists like Zero Hedge: Aleynikov has been trying to sell his house since August 2008. That made the mysterious Tyler Durden wonder just how long the Teza deal had been in the works for Aleynikov. Further, he wonders if Goldman waited to pounce on Aleynikov at a moment that would cut Teza off at the knees , preventing it from becoming a serious competitor to Goldman Sachs, the marketplace gorilla.

Goldman now claims it stands to lose millions. The 32 megabytes of dits and dats could do real harm; set up some market manipulation if in the wrong hands. But it’s hard to put the genie back in the bottle. The manipulation game is now an open secret.


One T/S Member Comment Called Out, 2 Total Comments
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  1. collapse expand

    It looks like Sergey’s next Dance Show may be from prison.

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    I am a financial writer and have worked for or contributed to a number of news publishers. As the song goes, "some are dead and some are living, but in my life, I have loved them all" -- Knight-Ridder Financial, USA Today, Quick Nikkei News, and Barron's -- to name a few. I am grateful to Wall Street for creating a spectacular market smash-up based on the mortgage securities market, my first beat. I'm ever so much more popular at dinner parties these days. I hope you enjoy my blog, it marks my return from the mommy track. There's no tantrum I can't handle.

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