KRIMINAL KAPITALI$M

Wealthy Russian undertook $90 million hack-and-trade scheme, U.S. says at trial



Vladislav Klyushin, an owner of an information technology company with ties to the Russian government

Mon, January 30, 2023 
By Nate Raymond

BOSTON (Reuters) -A wealthy Russian businessman with ties to the Kremlin made tens of millions of dollars trading on secret financial information obtained by hackers about multiple companies before it was public, a U.S. prosecutor said Monday at the start of his trial.

Vladislav Klyushin, 42, and his associates made nearly $90 million trading stocks based on yet-to-be-announced information about hundreds of publicly-traded companies stolen by hackers, Assistant U.S. Attorney Stephen Frank told a federal jury in Boston.

"The defendant had tomorrow's news - tomorrow's headlines -today," Frank said in his opening statement. "And he exploited it for tens of millions of dollars in profits."

Klyushin, whose technology company M-13 did work for Russian President Vladimir Putin's government, personally turned a $2 million investment into $21 million, trading on hacked information and brought other investors into the scheme, Frank said.

The hackers who obtained the information, prosecutors said, include Ivan Ermakov, a former Russian military intelligence officer wanted on separate U.S. charges over allegations he was involved in schemes that interfered with the 2016 U.S. presidential election.

Frank did not mention Putin or that election-related case, as a judge has barred reference to it at trial. But he stressed Ermakov worked with Klyushin and his associates to secure "big money" through hacked information.

Klyushin has pleaded not guilty to charges of conspiracy, wire fraud, unauthorized access to computers, and securities fraud.

'ZERO EVIDENCE' - DEFENSE

Klyushin's lawyer Maksim Nemtsev countered that the prosecution's case was built on "gaping holes and inferences."

He said there was "zero evidence" Klyushin ever saw or possessed a stolen earnings report and that instead his client had built up an operation within M-13 to monitor media and gauge investor sentiment that could be used instead for trading.

"There’s nothing illegal about being Russian, about having wealth, about having an IT technology company that contracts with the government," Nemtsev told the jury.

The three-week trial coincides with a low point in U.S.-Russia relations following Moscow's invasion of Ukraine in February last year. The case predates the war, but Klyushin's connections to the Kremlin have long intrigued U.S. authorities.

Klyushin was arrested in Switzerland while on a ski trip in March 2021 and was later extradited. His Swiss lawyer, Oliver Ciric, has said that before his arrest, U.S. and British intelligence agencies had tried to recruit him.

On Monday in court, the prosecutor Frank said that at M-13, Ermakov and others broke into the networks of two firms that help publicly traded companies file reports with securities regulators, Donnelley Financial Solutions and Toppan Merrill.

Hackers from 2018 to 2020 viewed and download yet-to-be-announced earnings reports for hundreds of companies including Tesla Inc, Microsoft Corp and Kohl's, which Klyushin and others used to trade before the news was public, Frank said.

"It wasn’t luck, and it wasn’t because of carefully financial research either," Frank said to the jury. "The defendant cheated."

(Reporting by Nate Raymond in Boston; Editing by Alexia Garamfalvi and Grant McCool)