Boston jury convicts Russian exec as ringleader of financial-hacking ring

A federal jury in Boston today convicted the owner of a Moscow consulting firm of leading hackers in obtaining pre-release financial info from public held US companies, which let them make $90 million in profits based on the insider information they obtained, the US Attorney's office reports.

Vladislav Klyushin, 42, of Moscow, was actually charged with two of his employees, but they stayed safely behind in Russia while he was arrested in Switzerland, where authorities then turned him over to the US - after an extended extradition battle waged by both his attorneys and the Russian government in 2021. He was nabbed at an airport where he, his wife and their children were walking from the private jet that had carried them from Russia to the private helicopter that was to take them to a Swiss ski resort. Two other employees face similar charges in another case, but they also stayed in Russia.

Klyushin, who once received an award from Vladimir Putin, faces sentencing on May 4 on the charges of wire and security fraud, which could mean a sentence of up to 20 years.

Federal prosecutors convinced a jury that Klyushin orchestrated his employees - one also charged in absentia for hacking related to the 2016 elections - to break into servers onto which publicly held companies would load SEC statements before their release to the government and public. Klyushin's M-13 hackers would then make stock trades based on information before it was released.

None of the companies are based in Massachusetts, but federal prosecutors could bring the charges against him here because M-13 used a data center and VPN service based in Boston to carry out their hacks. According to the US Attorney's office:

Klyushin and his co-conspirators deployed malicious infrastructure capable of harvesting and stealing employees’ login information and used proxy (or intermediary) computer networks outside of Russia to conceal the origins of their activities. With this access, Klyushin and his co-conspirators viewed and downloaded material non-public information, such as quarterly and annual earnings reports that had not yet been filed with the SEC or disclosed to the general public, for hundreds of companies – including Capstead Mortgage Corp., Tesla, Inc., SS&C Technologies, Roku and Snap, Inc. Many of the illegally obtained earnings reports were downloaded through a computer server located in downtown Boston.

Armed with this information before it was disclosed to the public, Klyushin and his co-conspirators knew ahead of time, among other things, whether a company’s financial performance would meet, exceed or fall short of market expectations – and thus whether its share price would likely rise or fall following the public earnings announcement. Klyushin then traded based on that stolen information in brokerage accounts held in his own name and in the names of others. Klyushin and his co-conspirators also distributed their trading across accounts they opened at banks and brokerages in several countries, including Cyprus, Denmark, Portugal, Russia and the United States, and misled brokerage firms about the nature of their trading activities.

When Klyushin was first flown to the US and then locked up at the Plymouth County jail, he initially sought to be placed under house arrest in an apartment he would rent in the Seaport. through his attorney, Klyushin said this would put him closer to the Moakley Courthouse and give him more time to go over the voluminous records in the case, most in Russian - and that to ensure he showed up for trial, he would have his wife and children move to him, and would hire a private-security firm to watch over him.

But two federal judges rejected the argument, agreeing instead with prosecutors that a rich man well versed in international travel was too much of a flight risk. Prosecutors at one point said it would just be too easy for him to get on a boat at a nearby dock and be out in international waters before anybody might realize he's gone.