Header graphic for print
Trading Secrets A Law Blog on Trade Secrets, Non-Competes, and Computer Fraud

Manhattan District Attorney Considers Formal Charges Against Computer Programmer For Alleged Theft of Confidential Trading Codes

Posted in Computer Fraud, Practice & Procedure

On August 15, state proceedings were temporarily adjourned while prosecutors decide whether to file formal charges against programmer Sergey Aleynikov in this high profile trade secret/data theft matter.

Last week, Aleynikov was charged with state crimes for the alleged theft of confidential trading codes, despite the fact that the federal court of appeals had already dismissed federal charges earlier this year. The state prosecutors have not yet announced a formal grand jury indictment against Aleynikov.

Aleynikov first entered the limelight in 2009, after he was reported to the U.S. Attorney’s office for allegedly stealing confidential trading code. According to the government’s charges, Aleynikov allegedly copied and removed confidential company trading code to use at his new job at a startup company in Chicago. In 2009, federal prosecutors charged him with trade secret theft under the Economic Espionage Act and transporting stolen property in interstate commerce under the National Stolen Property Act (NSPA). In December 2010, he was convicted. The Second Circuit Court of Appeals overturned this verdict in February 2012, holding the stolen code was not a good or product intended for interstate commerce, and thus, Aleynikov had not violated either law. Aleynikov was released from prison in February 2012. Some legal commentators  with the Second Circuit’s decision.

It was thought that this may be the end of Aleynikov’s legal troubles. However, on August 2012, Manhattan District Attorney Cyrus Vance filed state charges against Aleynikov. The District Attorney alleged Aleynikov had violated New York State law through “unlawful use of secret scientific material” and “unlawful duplication of computer related material.” Both charges are felonies, and if convicted, Aleynikov could serve up to four years in prison. The case was recently adjourned, and Aleynikov was released on bail. Prosecutors have until October 23 to decide whether to file formal charges.

 According to the Manhattan District Attorney’s Office statement, the code allegedly stolen by Aleynikov is “so highly confidential that it is known in the industry as the firm’s secret sauce.” Furthermore, the District Attorney stated “employees who exploit their access to sensitive information should expect to face criminal prosecution in New York state in appropriate cases.” We will keep you posted on this matter as proceeds in the New York state court.