Must read. An interesting section from Facciponte:
My understanding is that Goldman Sachs realized that this was a problem based upon their review of those logs just a few days ago. The government was not contacted until Wednesday about this matter.
I think what Ms. Shroff is confusing is Goldmanâ€™s civil remedies, to the extent that it has any, and this criminal case. Maybe Goldman can go out and get whatever the German equivalent is of a TRO. But this is, in the governmentâ€™s view, a crime that we have shown probable cause for, and therefore it is possible that the defendant may compound his crime and pose a danger to the community. And the bail statute allows the court to detain him if he is a danger.Shoff takes offense to this and makes the point that Goldman likely knew about the situation for over a month, delaying, for unknown reason, until striking when it did. Some derivative conspiracy theories could be derived from this. But in a nutshell, the math, according to the sworn testimony by the U.S. Attorney, is that it took less than 48 hours between Goldman realizing it had been compromised (on Wednesday) and the FBI arresting Sergey at Newark (on Friday).
And here is what seems to be the challenge for all hackers out there:
THE COURT: Well, what makes you think that it hasnâ€™t already been transferred since you do now know whether other people have access to the Germany server? Itâ€™s already compromised, so the financial institution has to take steps now if youâ€™ve made it aware of the compromise to adjust for the loss of its trading platform.
MR. FACCIPONTE: Your Honor is correct. I couldâ€™ve been disseminated in this time. It does not mean, however, that if it has not been disseminated we should not take steps to prevent the defendant from disseminating information if it is not already out there.
THE COURT: If as you say, the material is on the server in Germany, if anyone can access the material through that server, that is to say it is not only the defendant who can access it; he might be able to provide other persons with information that would allow them to access it, if thatâ€™s so, then what difference does it make whether heâ€™s detained or not if he can communicate that information?
MR. FACCIPONTE: Right now our understanding is that the server can only be accessed by someone who has his user name and password.
THE COURT: Who has what, sir?
MR. FACCIPONTE: His user name and password.
THE COURT: Okay. So if he gives that to you, you can access that, isnâ€™t that correct?
MR. FACCIPONTE: That is correct, Your Honor.
THE COURT: So whether heâ€™s detained or not doesnâ€™t him from communicating that information to you or anyone else. And therefore the server could be accessed and the financial institutions and the markets compromised as you have described.
MR. FACCIPONTE: It would certainly be more difficult, Your Honor. And I donâ€™t believe the public ought to bear the burden or the risk of that coming to past. In addition --
THE COURT: But if heâ€™s detained, what prevents him from communicating the information? Thatâ€™s what I donâ€™t understand.
MR. FACCIPONTE: It would be a lot harder. He would have to at the very least enlist and accomplice.
THE COURT: Okay.
MR. FACCIPONTE: Which people may not want to be accomplices. [TD: not so sure about that one]
THE COURT: Thatâ€™s true whether heâ€™s detained or at liberty.
MR. FACCIPONTE: Okay. But if heâ€™s at liberty he would not necessarily -- he would not need an accomplice. He could just pass it on to another server somewhere.
THE COURT: He may already have accomplices who may have the information that can access the server in Germany. Whether heâ€™s detained or not, I still donâ€™t understand why being detained means the information canâ€™t be disseminated to access the server.
MR. FACCIPONTE: Because the server -- if the server had been in the United States, Your Honor, we would already be preparing process to free --
THE COURT: But itâ€™s not.
MR. FACCIPONTE: The government needs a few days, given the holiday weekend, it would be difficult to do that. But the government needs a few days to consult with German authorities to take the steps to freeze that server.
So if the court is not prepared to detain the defendant on a general showing, the government would at least ask that the defendant be detained until such time as they can secure the server, which we are moving to do even as we speak now.
THE COURT: I still donâ€™t understand why detaining him prevents him from communicating information so that someone can access the server. If you make that clear to me, then I understand more acutely why youâ€™re arguing that he should be detained.
MR. FACCIPONTE: Well, he would --
THE COURT: If it just makes it difficult, lots of things are difficult, but not impossible.
MR. FACCIPONTE: If he were detained now, for example, I donâ€™t believe he would have immediate access to telephone privileges at the NCC or MDC. I believe it takes days to set those accounts up. He would have to tell somebody physically. I donâ€™t believe anybody would -- he would have to enlist a co-conspirator right now.
And I think when you weigh the probability of him engaging in that behavior and being able to pull that together, first is the potential risk of just letting him go, I believe he ought to be detained. Because he still has more burdens in prison to disseminate his information than he does if heâ€™s out in the street.
So if heâ€™s out in the street, he just needs access to a cell phone. In prison, he needs to get access to a phone which is not a right if he is detained. He would need to write a letter. A letter takes several days to get to where it needs to go.
In the meantime, we would have -- we would very likely have the server locked down at that point in time.So in a nutshell, here is Goldman's manifesto: Yesterday - Program Trading, Today - Germany, Tomorrow - The World.
hat tip Reuters