recently there have been rumors (unsubstantiated, so far) about goldman sachs rigging the markets. i don't mean the usual market manipulation that we have come to accept as normal, but instead sophisticated methods of frontrunning trades that amount to outright theft. time will tell if any of this is true, but this is some of what i have been found on the internet. some have speculated that it is only a matter of when, not if, goldman sachs collapses. again, these are unverified rumors and no accuracy is being claimed, so take everything with a grain of salt:

first this:

The admission that Government Sachs has lost the code to its proprietary market manipulation program may have a useful purpose that I haven’t seen mentioned yet. I propose that GS may actually have alternative reasons for losing (leaking) the code to the world. The first reason could be that they want a scapegoat for losing control of the gold/silver and equity markets with gold/silver exploding to the upside and/or the equity market crashing. GS may already have positioned themselves to benefit from the upward movement of gold/silver. After all, if their computer program could be used for nefarious purposes to ‘control’ the price of metals downward why couldn’t the program just as well be used to manipulate prices of gold/silver upward? It seems that a computer whiz could use the program to boost the prices as well as suppress them! So, the wonderful people at GS could blame someone else for ‘stealing’ their program and using it in a fashion contrary to its originally designed purpose. Another reason could be that GS wants to level the playing field so that other governments could use their program to do exactly what GS has been doing for years, manipulate with advantage. This would be their excuse for ‘losing’ control of the markets. Lastly, could it be that GS has a newer and better program that could take advantage of the one they ‘lost’ and continue their rigging game for a while longer?

and this:

This Goldman Sachs thing stinks to high heaven. I can see of only two reasons that Goldman would make this a public discussion:

1) There is a massive market manipulation sting about to go down with computer rigging trading programs being blamed. The Goldman program may have been fingered and Goldman is trying to claim innocence by saying "somebody stole our program".

2) The final market collapse is upon us and the derivative bomb will destroy ALL markets. Goldman will try to claim they had nothing to do with it because their program was stolen.

Either way something big is about to happen and Goldman wants to have their alibis lined up.

and then this:

Something really ugly popped up on Daily Kos yesterday late in the afternoon.....

...GS, through access to the system as a result of their special gov't perks, was/is able to read the data on trades before it's committed, and place their own buys or sells accordingly in that brief moment, thus allowing them to essentially steal buttloads of money every day from the rest of the punters world.

Two things come out of this:

1. If true, this should be highly illegal, and would, in any sane country result in something like what happened to Arthur Andersen...

(2. ... is way off point....)

God help Goldman if this is true and the government goes after them. This would constitute massive unlawful activity. Indeed, the allegation is that Goldman alone was given this access!

God help our capital markets if this is true and is ignored by our government and regulatory agencies, or generates nothing more than a "handslap." Nobody in their right mind would ever trade on our markets again if this occurred and does not result in severe criminal and civil penalties.

There apparently is reason to believe that Sergey might have been involved in exactly this sort of coding implementation. Specifically, look at the patent claims cited on DailyKos; his expertise was in fact in this general area of knowledge in the telecommunications world......

This is precisely the sort of thing that a Unix machine, sitting on a network cable where it can "see" traffic potentially not intended for it, could have an interface put into what is called "promiscuous mode" and SILENTLY sniff that traffic!

ASSUMING THE TRAFFIC IS PASSING BY THE MACHINE ON THE WIRE THIS IS TRIVIALLY EASY FOR ANY NETWORK PROGRAMMER OF REASONABLE SKILL TO DO. IF THAT TRAFFIC IS EITHER UNENCRYPTED OR IT IS EASY TO BREAK THE ENCRYPTION.....

Folks, I have no way to know what the code in question does, but if there's anything to this - anything at all - there is a major, as in biggest scam of the century - scandal here - something much, much bigger than Madoff or Stanford.

What would this mean, if it was all to prove up?

It would mean that Goldman was able to "see" transaction order flow - bid, offer, and execute messages - before they were committed in the transaction stream. Such a "SNIFF" would be COMPLETELY UNDETECTABLE by the sender or recipient of the message.

The implication of this would be that they would be able to front-run any transaction where the data was visible to them, thereby effectively "stealing pennies" from each transaction they were able to front-run.

http://market-ticker.denninger.net/archives/1192-FLASH-Goldman-Code-Theft-BOMBSHELL.html