Trade Secrets

United States v. Aleynikov: When Stolen Source Code Fell Outside the EEA

The Second Circuit reversed a Goldman Sachs programmer's criminal conviction because the company's high-frequency trading code was not a product 'produced for or placed in' commerce, exposing a gap Congress closed within months.

March 11, 2025
Lines of computer source code on a dark monitor in a trading office
Aleynikov turned on a single statutory phrase: whether proprietary trading code was a product 'produced for or placed in' commerce. Shutterstock
Educational content, not legal advice. This article explains general legal concepts. It does not create an attorney–client relationship. For your specific situation, consult a licensed attorney.

In United States v. Aleynikov, No. 11-1126, 676 F.3d 71 (2d Cir. Apr. 11, 2012), the United States Court of Appeals for the Second Circuit reversed the conviction of Sergey Aleynikov, a former Goldman Sachs programmer found guilty of stealing the source code for the bank’s high-frequency trading (HFT) platform. The case began in the United States District Court for the Southern District of New York, No. 1:10-cr-00096-DLC, before Judge Denise L. Cote, where a jury returned a guilty verdict on December 10, 2010, and the court sentenced Aleynikov on March 18, 2011, to 97 months in prison. The Second Circuit, having ordered Aleynikov released from custody immediately after argument in February 2012, issued its written opinion reversing the judgment on April 11, 2012. The reversal did not rest on weak proof that Aleynikov took the code—the panel assumed he did—but on a narrow statutory holding that the conduct Congress criminalized in the Economic Espionage Act simply did not reach what he had taken.

At a glance

  • Case: United States v. Aleynikov, No. 11-1126, 676 F.3d 71 (2d Cir. 2012)
  • District court: S.D.N.Y., No. 1:10-cr-00096-DLC (Judge Denise L. Cote)
  • Verdict: December 10, 2010; sentenced March 18, 2011 (97 months)
  • Appeal decided: April 11, 2012 (defendant ordered released after February 2012 argument)
  • Charges: Theft of trade secrets, 18 U.S.C. § 1832; transportation of stolen property, National Stolen Property Act (NSPA), 18 U.S.C. § 2314
  • Holding: Conviction reversed on both counts; the HFT source code was not a “product that is produced for or placed in interstate or foreign commerce” under the EEA, and intangible code is not “goods, wares, or merchandise” under the NSPA
  • Aftermath: Congress amended § 1832 with the Theft of Trade Secrets Clarification Act of 2012, enacted December 28, 2012

On his last day at Goldman in June 2009, Aleynikov uploaded hundreds of thousands of lines of the firm’s proprietary trading source code to a server in Germany, deleted his bash history to cover the transfer, and later downloaded the files at home before joining a startup, Teza Technologies, that intended to build a competing HFT system. The facts looked like a paradigmatic trade-secret theft. The legal problem was that the EEA, as written in 1996, did not criminalize the theft of every trade secret—only those tied to a “product” moving in commerce.

The statutory text that decided the case

The 1996 version of § 1832(a) made it a crime to steal a trade secret “related to or included in a product that is produced for or placed in interstate or foreign commerce.” Goldman’s HFT system was indisputably valuable and indisputably secret. But Goldman did not sell it, license it, or place it on the market. The firm used the platform internally to trade, guarding it as a competitive advantage precisely because no one else could buy it. The Second Circuit seized on that distinction. Because Goldman “had no intention of selling its HFT system or licensing it to anyone,” the panel held, “the HFT system was not designed to enter or pass in commerce, or to make something that does.” The code was therefore not “related to or included in a product that is produced for or placed in interstate or foreign commerce,” and the EEA count failed as a matter of law.

The court grounded the result in the rule of lenity and in a textualist refusal to stretch criminal statutes past their terms. Judge Dennis Jacobs’s opinion acknowledged that the outcome might seem counterintuitive—Goldman’s secret was exactly the kind of asset the EEA was meant to protect—but insisted that the remedy for a statute that fails to reach plainly culpable conduct lies with Congress, not the courts. A criminal defendant cannot be convicted of conduct the statute does not unambiguously cover, however blameworthy that conduct appears.

The National Stolen Property Act count

The government had charged Aleynikov under the NSPA as a backstop, alleging that he transported stolen “goods, wares, or merchandise” across borders. That theory collapsed for a related but distinct reason. Relying on the Supreme Court’s reasoning in Dowling v. United States, 473 U.S. 207 (1985), the panel held that purely intangible property—source code uploaded to a server, never embodied in a physical medium that itself was stolen—does not constitute “goods, wares, or merchandise” within the meaning of § 2314. The statute, the court reasoned, contemplates physical things. Aleynikov did not walk out with a stolen disk; he copied intangible information, leaving Goldman’s own files intact. The theft of the code’s economic value, without the taking of a tangible object, fell outside the NSPA’s reach.

Both holdings shared a common thread: federal property-crime statutes drafted for an earlier economy mapped awkwardly onto the theft of pure information. The EEA’s “product in commerce” limitation and the NSPA’s tangibility requirement each left a recognizable category of modern misappropriation—internal-use proprietary software—uncovered.

Congress’s rapid response

The decision drew immediate attention because it exposed a loophole with obvious implications for every firm whose crown jewels are internal tools rather than marketed products: search algorithms, trading engines, manufacturing controls, proprietary models. Within months, Congress acted. The Theft of Trade Secrets Clarification Act of 2012, Pub. L. No. 112-236, signed December 28, 2012, rewrote the operative phrase in § 1832(a). The amended statute reaches a trade secret “related to a product or service used in or intended for use in interstate or foreign commerce.” The additions are decisive: “service” captures intangible offerings, and “used in” sweeps in assets a company deploys internally rather than sells. After the amendment, Goldman’s HFT platform—used by the firm to trade in interstate and foreign commerce—would squarely qualify.

The speed of the fix underscores that the court read the original statute correctly. Congress did not overrule the Second Circuit’s interpretation; it accepted that interpretation and changed the text. Aleynikov thus stands as a clean illustration of the textualist division of labor: courts apply the words Congress enacted, and Congress bears responsibility for closing the gaps those words leave.

Open questions

Aleynikov resolved the federal charges but left several edges unsettled. The decision says little about how the amended “used in or intended for use in commerce” language applies to genuinely internal tools with no external footprint—software that supports a business but never touches a customer transaction. It also leaves open how courts should treat hybrid assets, such as code that is partly licensed and partly retained, or trade secrets embodied in a service delivered abroad. And because the reversal turned on statutory scope rather than the sufficiency of the theft proof, it offers little guidance on what evidence of “intent to convert” or “intent to injure the owner” the government must marshal in a copy-not-carry case. Finally, the parallel state prosecution that followed—New York charged Aleynikov under state law after the federal reversal—raised double-jeopardy and dual-sovereignty questions that the EEA opinion did not address.

Implications

  • The amended EEA closes the internal-use gap. After the 2012 clarification, trade secrets tied to a product or service “used in” commerce are covered, so the precise loophole that freed Aleynikov no longer exists for conduct occurring after December 28, 2012.
  • Charge the right statute. Aleynikov warns prosecutors that the NSPA is a poor fit for intangible-information theft; the EEA, as amended, is the better vehicle.
  • Textualism governs criminal scope. Courts will not expand a criminal statute to reach plainly culpable conduct the words do not cover; the rule of lenity favors the defendant where the text is ambiguous.
  • Internal “crown jewels” are now protected. Firms whose most valuable secrets are never sold—trading engines, algorithms, manufacturing know-how—gained clear federal criminal protection through the amendment.
  • State law remains a backstop. The post-reversal New York prosecution shows that a federal scope defect does not necessarily end a defendant’s exposure.

Frequently asked questions

Why was Aleynikov’s conviction reversed if he took the code? The Second Circuit assumed he took it but held that the 1996 EEA reached only trade secrets “related to or included in a product that is produced for or placed in interstate or foreign commerce.” Goldman never sold or licensed its HFT system, so the code was not such a product, and the conduct fell outside the statute.

Did this case change the law? Yes, indirectly. Congress responded with the Theft of Trade Secrets Clarification Act of 2012, which amended § 1832 to cover trade secrets related to a product or service “used in or intended for use in” commerce—language that now reaches internal-use software like Goldman’s.

Could the same conduct be prosecuted today? Almost certainly. Under the amended statute, code a firm uses internally to conduct interstate or foreign commerce qualifies, eliminating the gap that produced the reversal.

Authorities and sources