Sexytime fun!  A former programmer at Goldman Sachs was arrested Saturday on charges that he stoled some source code for GS’s computer-trading system.

Some explanation, for those of you who don’t know what this is or why it’s a big deal.  You remember Wall Street, right?  Charlie Sheen is sitting in a room with a hundred other dudes watching a ticker and when a stock hits a certain price, he places orders to buy or sell for his clients.  High drama, but increasingly, it doesn’t work that way anymore.  Charlie Sheen is way too ineffecient, for one. Computers are responsible for more and more of the business of Wall Street, with programs written to react in milliseconds to changing market events. The week that’s important to this story, program trades comprised 48% of all market activity. Charlie Sheen is bored.

So, back to our arrested guy.  His name is Sergey Aleynikov, and for just over a couple of years, he worked for Goldman Sachs as a programmer. His big project was developing software to do that very thing.  He left GS last month for a job in Chicago that paid three times what he made at Goldman (no word on where he went to work, but it might or might not be important anyway).  So it’s a little surprising that he was busted by GS IT uploading virtually all of the source code for this project to a server located in Germany, owned by a London resident, because every programmer I know just knows better, or at least knows how to cover their tracks.  He’s said to have downloaded 32 megs of code, which might not sound like much but it’s actually in the neighborhood of 750K lines.  That’s a lot.

Why is this a big deal? Goldman Sachs often sits at or near the top of the list of top  program traders, in terms of volume. I’m talking more than half of all program trades were done by this one company. Goldman’s ability to have their software react more quickly, process faster, and complete trades before other firms is, as one can imagine, pretty key to its success – and due almost entirely to its software. If that code got out, which it appears to have done, that could wreck their advantage. But strangely enough, last week’s report not only didn’t have GS sitting at #1, it wasn’t in the top 15 at all. Zero Hedge thinks the two are related, that perhaps GS scaled back or suspended trading once it discovered the full scope of what Aleynikov is alleged to have done.

Now, nevermind for the moment the implications of GS having cornered the program trading market so effectively, when program trades comprise such a large percentage of all trades made nowadays, that’s a whole ‘nother matter.   What’s really interesting here is that GS said nothing about this to its customers or stockholders.  It did, however, contact the FBI, who moved with almost unprecedented speed from initial contact to arrest in less than a month.  For Aleynikov’s part, he claims he was just trying to download some open source software he had been working on, and accidentally copied everything else.  Which, you know, I don’t buy for a second because there is no need to go through all the trouble he did if it’s simply open source software.  Especially because his new job involved helping a new firm set up its own high-volume automated trading system for a salary of $1.2m a year.

Goldman Sachs and the NYSE both swear there is nothing suspicious about Goldman being left off the list of program trades last week, that it’s just a coincidence that this happened the same week one of their former programmers was arrested for leaking the very computer code that enables Goldman to move by far the most volume week to week.

Anyway, should I come across this magical code, I will use it to get rich and you’ll never hear from me again.