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Thursday, February 11, 2010

Sergey gets indicted

Sergey Aleynikov gets indicted for stealing computer code that allows Goldman to front run clients.

Tonight on PBS newshour, we have a story how Goldman front runs clients. It's sanctioned by Geithner!

Bring on discovery!

Narrator: But consider HOW they're making those bucks, says Nomi Prins. On knowledge that, as when she was there, comes in with every trade a client asks Goldman to make.

Nomi Prins: And just by evidence from the profits they make and where they make them, what divisions they make them in, they’re not sitting on that knowledge. They are trading on that knowledge.

Paul Solomon: So they know somebody is going to buy a commodity or currency so they either buy that commodity or currency first or a commodity and currency very much like it.

Nomi Prins: Any information that you get, particularly if it’s going to move the markets a lot, is going to filter into the trading positions you take.

Narrator: But isn't this "front running" -- trading ahead of your clients (to profit from the price changes that will come from the clients’ trades) for your OWN firm's benefit? And isn't that, strictly speaking, illegal?

David Stockman:The long and ancient secret of Wall Street is they’ve always been front running their clients! In other words when you’re in the customer trading business and then you’re in the proprietary business, which trade are you making first?

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