You may recall that he was convicted under the Economic Espionage Act for downloading some high frequency trading software from Goldman Sachs, where he worked.

Apparently, the judge in the trial completely bought into the prosecutions expansion of the law, intended to prosecute people for selling military secrets to the Chinese, to this case, and the appellate court came down hard on the judge. They did not just remand this back to the lower court, they ordered the lower court to enter a judgement of acquittal.

Felix Salmon explains why whole case was such an outrage:

The secrets at defense contractors, of course, are secret for reasons of national security. The secrets at investment banks and hedge funds, by contrast, are secret purely for reasons of profit: they reckon that if they have some clever algorithm which nobody else has, then that makes it easier for them to profit from it. Which is why it was always a stretch for the government to use the EEA to prosecute Aleynikov — indeed, it is why it was always a stretch for Aleynikov to be criminally prosecuted at all. Goldman could have brought a civil case against him, but instead they got their wholly-owned subsidiary, the U.S. government, to come down on him so hard that he ended up with an eight-year sentence. Violent felons frequently get less.

The forthcoming decision from the Second Circuit is likely to be a doozy; I’m told that the judges shredded the prosecutors during the oral hearing. And certainly their decision to enter a judgment of acquittal, rather than any kind of retrial, is a strong indication that they handed down this order with extreme prejudice against prosecutorial overreach.

(emphasis mine)

This has been a lose-lose for the Vampire Squid. They looked like bullies, they brought a lot of attention to the bit of front-running that is high frequency trading, and they have now lost the case.

That being said, I don’t expect Goldman, or the prosecutors, to give up just yet.

Background here.