Russian businessman goes on trial on U.S. hack-and-trade charges (updated)

Donnelley Financial Solutions

30/01/2023 20:45

(Recasts with details from trial)
    By Nate Raymond
       BOSTON, Jan 30 (Reuters) - A 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 companies stolen by hackers, Assistant U.S.
Attorney Stephen Frank told a federal jury in Boston.
    Klyushin, whose Moscow-based technology company M-13 did
work for Russian President Vladimir Putin's government,
personally turned a $2 million investment into $21 million and
brought other investors into the scheme, Frank said.
    "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 profit."
    But defense lawyer Maksim Nemtsev countered that Klyushin
was already had no reason to cheat, after already gaining
financial success through his business, and that the
prosecution's case was built on "gaping holes and inferences."
    "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. And while the case against Klyushin predates
the war, his 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. He has pleaded not guilty
to charges of conspiracy, wire fraud, unauthorized access to
computers, and securities fraud.
    Prosecutors say Klyushin's company, M-13, employed a former
Russian military intelligence officer wanted by the U.S.
government over allegations of involvement in hacking schemes
aimed at interfering in the 2016 U.S. presidential election.
    During Monday's trial, Frank said that hacker, Ivan Ermakov,
and others broke into the networks of two firms that help
publicly traded companies file reports with securities
regulators, Donnelley Financial Solutions  DFIN.N  and Toppan
Merrill.
    Hackers from 2018 to 2020 viewed and download
yet-to-be-announced earnings reports for hundreds of companies
including Tesla Inc  TSLA.O , 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. "The defendant cheated."
 (Reporting by Nate Raymond in Boston; Editing by Alexia
Garamfalvi and Grant McCool)
 ((Nate.Raymond@thomsonreuters.com and Twitter @nateraymond;
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