Goldman Sachs' Trillion Dollar Code and Insider Trading

Hey ATS,

As you are all aware we are in the middle of a deep recession, the result of the now infamous Credit Crunch!

One of the first Banks to make it out of the crisis was Goldman Sachs, as reported by the New York Times in October of this year.

But the bank was humbled along with the rest of Wall Street in 2008 when the financial markets crashed. Goldman turned itself into a commercial bank holding company in September 2008 and managed to survive Wall Street's meltdown with the help of a federal bailout. By April 2009, Goldman announced that it was healthy enough that it would seek to raise new capital and return the money it had received from the government.

On July 14, it announced that it had earned second-quarter net profits of $3.44 billion, and on Oct. 15, it announced $3.19 billion more.

Well done Goldman you say??!

Is there a clue somewhere to how they managed to pull off this amazing feat?

A story broke in July they may give us an insight into this puzzling question.

ReutersUS

Did someone try to steal Goldman Sachs’ secret sauce?

The allegations, if true, are big news because the codes the accused man, Sergey Aleynikov, tried to steal is the secret code to unlocking Goldman’s automated stocks and commodities trading businesses.

The criminal case began to unfold on the evening of July 3 when Aleynikov was arrested by FBI agents at Newark Liberty Airport, after returning from Chicago. Aleynikov had just started a job with another firm in Chicago, after leaving the big firm in NY in early June. It appears the financial institution allegedly victimized by Aleynikov had alerted federal authorities that its former employee might be up to no good.

On July 4, Aleynikov was processed on a “theft of trade secrets” charge in a criminal complaint that was filed in federal court in Manhattan. As of this afternoon, he was still being held in federal custody pending posting of bail.

US vs Aleynicov PDF

The case above goes some way to proving the value of Goldman's Code.

Around the same time this was all going down, a pertinent question was being asked on Wall St blog Zero Hedge, which may in fact point to the code being far more valuable!

Is Goldman Legally Frontrunning Its Clients?.

Are Goldman 360 clients (in)voluntarily signing off a release to be front ran by Goldman on any portal-based trade? Could Goldman please clarify just what "internal business purposes" means in the context of this overarching disclaimer, and also whether Goldman has ever actually used 360 submitted information in the decision making process of its prop trading desk?

Front Running

Front running is the illegal practice of a stock broker executing orders on a security for its own account while taking advantage of advance knowledge of pending orders from its customers.

The general idea is explained succinctly by ABC News.

Insider Trading: Supermarket Lines, the Stock Market and Chance

By being privy to others' intended trades, and immediately and preemptively acting, it could reap profits that would make inside traders of the past look like underlings stealing pens and staplers from the company storeroom.

However accomplished, Goldman has enjoyed more than $100 million in trading revenue on more days than it hasn't this year.

That's right, a $100 million a day, that would seriously make bending the rules very tempting whilst in the middle of a recession.

Goldman spokesman Ed Canaday did reply:

Goldman Sachs Responds To Zero Hedge

Dear Mr Durbin:

This is in response to your recent blog about our web site disclaimer. It is quite usual for websites to have disclaimers that refer to the monitoring of site usage. Most web sites, including yours we noticed, track usage by their visitors. This is primarily used for marketing and to help inform decision about enhancing content.

Your suggestion that we monitor our web site to facilitate front-running is untrue and offensive.

Sincerely

Ed Canaday
Vice President
Goldman, Sachs & Co.

Front running was also highlighted to be a problem by the SEC at some stock trading venues, known as DARK POOLS, as reported by ReutersUS.



So it is highly possible that Goldman Sachs has raked in Billions in profits because their software is quicker than the rest. Would they do that? In a recession, I wouldn't bet against it!!

It also results in a class system where you have those investors in the know, and those who aren't. A inevitable and necessary feature of any market, yes I agree in part....BUT

The prospect of thousands of people making billions of dollars not because they produce anything of value or because they efficiently allocate resources to worthy companies, but simply because they have better, faster software is not a pleasant one to contemplate.

ABC News


I do feel that this is probably one of the ways Goldman got themselves out of trouble in a hurry enabling them to post those huge profits!

Lucky Beggars (literally)

All the best ATS!




[edit on 6-12-2009 by kiwifoot]

This issue has been around a while - I certainly think it fits with Goldsackers philosophy - they are the trading arm of the NWO - and they are worthless scum who deserve death.

I hear the execs are buying guns to defend themselves - good, its no sport shooting unarmed people - so at least when 'Banker' season opens, the sports minded will have a better challenge.

reply to post by Amagnon


They are going to need more than those peashooters they are arming themselves with. I'm glad Bloomberg posted that article, now when "Banker" season opens everyone will know to bring their rifles and stay out of the range of the pistols.

I have come to the conclusion that no matter who we vote for, even third part people that the government is to far gone to clean up, there is only one way to reset it all.

Great research OP!
I suspect you're right about the temptation to insider trading, but I dont think we need a recession to justify it in their minds. The workings of financial markets are always at best obscure & at worst downright esoteric: its very difficult for them to get caught...
Still, just like the Bank of England Nominees, GS are representing such huge investments that they kind of bend the market around them, a bit like planets bending space-time, so that smaller entities orbit round them. Thus its a case of pretty much whatever they do, the markets will go their way. That said BOEN are suspected of insider trading too...

Originally posted by Bunken Drum
Great research OP!

I suspect you're right about the temptation to insider trading, but I dont think we need a recession to justify it in their minds. The workings of financial markets are always at best obscure & at worst downright esoteric: its very difficult for them to get caught...
Still, just like the Bank of England Nominees, GS are representing such huge investments that they kind of bend the market around them, a bit like planets bending space-time, so that smaller entities orbit round them. Thus its a case of pretty much whatever they do, the markets will go their way. That said BOEN are suspected of insider trading too...

No worries!

The problem (as always) is transparency, or lack of it.

Also, the SEC has proven time and time again to be selective in which laws to apply, who to go after, and who to leave alone.

Goldman even had a board member on the Board of the FED at the same time they were negotiating their TARP requirements, how crazy is that!?

Fed Tightens Regulations on Its Regional Directors

The Federal Reserve, under attack in Congress for being too entwined with big banks, closed a loophole on Wednesday that allowed a director at Goldman Sachs to be a director of the New York Fed as the agency was bailing out Wall Street during the financial crisis.

This problem has been addressed but it's still staggering that it happened at all!

All the best, Kiwifoot!

reply to post by kiwifoot Oh absolutely! Transparency is almost the whole issue. The trouble is that, just as companies get around legal requirements for disclosure by using microscopic small print on packaging, so financial houses deliberately use longwinded, jargon & abbreviation filled explanations of what they're upto. I've found over the years that whenever I've just about sussed what they actually mean, lo & behold, there's a whole new bunch of terminology to learn.
It reminds me of a few years ago when I worked on a TV series where some ex-criminals were giving advice on home security. Basically their career of burglary was over because their MO had been defeated by new tech. So these blokes were making a living doing the same as the SEC, ie too little too late. If you can understand how the easy money gets made, why would you work for the regulators? You'd be in there doing it yourself, right?
The difference being that the SEC know full well that, with potentially billions at stake, they have to tread carefully unless they want to be found having tragically committed suicide...
I'll tell you, it doesn't work the other way around tho! Whenever I've tried to talk media jargon to an investor, all I got was "Thanks, we'll be in touch if we approve your proposal." ie f# off!
These people have the right idea: www.plainenglish.co.uk...

reply to post by kiwifoot


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do not overlook the 100 cents on the dollar settlement
paid to 'GS' for the Swaps or Dirivatives with AIG as the counter party

~i recall that was a payment of $13 Billion the gov't paid GS on behalf of AIG's failure to have enough money to pay off GS for the 'Bets' they made for something like 12 cents on the dollar~

Originally posted by St Udio
reply to post by kiwifoot

 

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do not overlook the 100 cents on the dollar settlement
paid to 'GS' for the Swaps or Dirivatives with AIG as the counter party

~i recall that was a payment of $13 Billion the gov't paid GS on behalf of AIG's failure to have enough money to pay off GS for the 'Bets' they made for something like 12 cents on the dollar~

I hadn't heard that one, I'll see if I can find some info on it and post it.

Thanks a heap!