Ex-Goldman programmer denied bail bid on appeal

By Grant McCool

NEW YORK (Reuters) - An appeals court on Tuesday denied a bid for bail by a former Goldman Sachs Group Inc programer sentenced to eight years in prison for stealing part of the bank's high-frequency trading code.

A lawyer for Sergey Aleynikov, 41, said in oral arguments earlier in the day that his client should never have been charged and requested his release on bail pending appeal before the U.S. Court of Appeals for the 2nd Circuit in New York. The lawyer, Kevin Marino, declined to comment on the panel's one-sentence ruling. The appeal brief is due on June 3.

Aleynikov, arrested by the FBI in July 2009 and convicted by a jury in December 2010 of trade secrets theft under the Economic Espionage Act and transporting stolen property across state lines, began his sentence on March 18.

In the oral arguments, a prosecutor, Joseph Facciponti, said a trial judge's rulings showed previous motions by Aleynikov to dismiss the charges were meritless "and not even close calls."

The government also argued that Aleynikov, a U.S. citizen who was born in Russia, is a risk of flight and should not be released pending the appeal.

Aleynikov's case increased attention on speed-trading platforms that financial firms spend hundreds of millions of dollars to develop.

Marino told the panel the economic espionage statute specifically covers "goods, wares and merchandise" and that "every circuit has held that intellectual property such as computer source code is not goods, wares or merchandise."

Aleynikov was accused and convicted of copying and removing trading code from Goldman, Wall Street's most influential bank, in 2009 before taking a new job at Teza Technologies LLC, a high-frequency trading start-up firm in Chicago. Teza and its employees were not accused of any wrongdoing.

High-frequency, computer-driven trading has become an important and competitive business. The software codes that trade shares in milliseconds are closely guarded secrets.

Aleynikov, who is a father of three and onetime collegiate-level competitive ballroom dancer, was convicted at a two-week long trial in Manhattan federal court before U.S. District Judge Denise Cote. She also imposed the sentence.

The cases are USA v Aleynikov, U.S. Court of Appeals for the 2nd Circuit in New York, No. 11-744 and No. 11-1126.

(Reporting by Grant McCool; editing by Phil Berlowitz, Gerald E. McCormick and Andre Grenon)