COLUMN-UPDATE 1-A Goldman trading scandal? Matthew Goldstein

-- Matthew Goldstein is a Reuters columnist. The views expressed are his own -- (Updates with comment from lawyer, wife in paragraphs 12-13)

By Matthew Goldstein

NEW YORK, July 5 (Reuters) - Did someone try to steal Goldman Sachs' secret sauce?

While most in the United States were celebrating the Fourth of July holiday, a Russian immigrant living in New Jersey was being held on federal charges of stealing secret computer trading codes from a major New York-based financial institution.

Authorities did not identify the firm, but sources say the institution is none other than Goldman Sachs (GS.N: Quote, Profile, Research).

The charges, if proven, are significant because the codes that the accused, Sergey Aleynikov, tried to steal are the secret sauce to Goldman's automated stock and commodities trading business.

Federal authorities contend the computer codes and related-trading files that Aleynikov uploaded to a German-based website help this major financial institution generate millions of dollars in profits each year.

The platform is one of the things that gives Goldman an advantage over the competition when it comes to the rapid-fire trading of stocks and commodities. Federal authorities say the platform quickly processes rapid developments in the markets and using secret mathematical formulas, allows the firm to make highly-profitable automated trades.

The criminal case has the potential to shed a light on the inner workings of an important profit center for Goldman and other Wall Street firms. The charges also raise serious questions about the safeguards that Wall Street firms deploy to protect these costly-to-build proprietary trading systems.