Somebody Stole Goldman’s Algorithms – Code that Makes Their Money Just Like Health Insurers Use

Anyone that read this blog often enough should know what an algorithm is by now. Those are the formulas that create all the business intelligence decisions that are made. Wall Street and the Health Insurance business are 2 of the heaviest investors. This brings me back to a few former posts that are worth a read, one here where the actual programmers on Wall Street spoke out about what they were instructed to do last year.

If you need a reminder on why we need smart people, you can reflect back here on the SEC hearings.

Madoff's Scheme – One Reason To Put the “Smart People” in the Right Places So We Don’t Get Fooled Again

Software engineers design these algorithms which bring in billions of dollars, and the programmers probably don't get a big piece of the pie either, otherwise this guy would probably have not been steeling if he had been paid high enough. The scary thing today is that we seem to be dumbing down our math and science curriculum in our public schools when we need it the most. One item worth a mention too is that Goldman admits the fact that they have the ability “to manipulate markets in unfair ways too”. Might health insurers who we do not trust be capable too? Let’s look back to the Ingenix Inquisition. Health Insurers are looking for new algorithms all the time.

Health Care Insurers Suggest Algorithms and Business Intelligence solutions to provide health insurance solution

Now they are worried that if someone outside knows how to run the code that all types of financial disasters could happen. I’m going to stop and delve down in the minds of folks who write code, we get a “buzz” out of watching what we wrote run, it’s just the way real code head geeks think. Is there someone else around that will know how to run it, of course there is. Geeks share code, mostly called open source but with propriety code and money at stake we enter into the world of black hat trading. It’s done all the time and unspoken as most of the world doesn’t understand it. I don’t know much about it but these folks below do and why the government is hiring them.

Homeland Security Appoints Black Hat Founder to Advisory Council

My own personal thoughts on this too is the fact that yes it is valuable code, so I might guess that it may have been modified and sold to other banking institutions too, that’s kind of the way this stuff works, or they have have done some off site server calculations, but we shall see when the rest of the story comes out. We saw that type of activity with health insurance too, with the data base used by Ingenix as many of the other carriers outside of United Healthcare subscribed to the information provided and used it for their decision making processes. A couple recent posts below somewhat explain a bit further. BD

AIG: You Bring the Nerds and the Algorithms and I’ll give you a AAA Rating…a little history from 1987

Senate Testimony – Insurers Confuse Consumers and Dump Those Who are Sick, a Wall Street Run System

July 7 (Bloomberg) -- Goldman Sachs Group Inc. may lose its investment in a proprietary trading code and millions of dollars from increased competition if software allegedly stolen by a former employee gets into the wrong hands, a prosecutor said.

Sergey Aleynikov, an ex-Goldman Sachs computer programmer, was arrested July 3 after arriving at Liberty International Airport in Newark, New Jersey, U.S. officials said. Aleynikov, 39, who has dual American and Russian citizenship, is charged in a criminal complaint with stealing the trading software. Teza Technologies LLC, a Chicago-based firm co-founded by a former Citadel Investment Group LLC trader, said it suspended Aleynikov, who started there on July 2.

Goldman May Lose Millions From Ex-Worker’s Code Theft (Update1) - Bloomberg.com