Russian with alleged ties to Putin convicted in hack-and-trade scheme

The Russian owner of a technology company with purported links to the Kremlin was convicted on Tuesday in Boston on charges related to hacking into computer networks to get advanced information on stock movements.

Vladislav Klyushin, 42, was convicted by a federal jury of conspiring to obtain unauthorized access to computers and to commit wire fraud and securities fraud. The latter carries a sentence of up to 20 years in prison, while the hacking charge could bring up to a five-year sentence. 

According to a federal indictment, Klyushin was the owner and director of the Moscow-based company M-13, which “offered penetration testing and ‘Advanced Persistent Threat (APT) emulation’.” The company claimed on its website to have provided services to the administration of Russian President Vladimir Putin, among other Russian government bodies.

From early 2018 until September 2020, Klyushin and four alleged co-conspirators carried out a hack-and-trade scheme to get advanced access to earnings reports and to make investments on behalf of clients based on what they found. They did so by breaking into the networks of Donnelley Financial Solutions and Toppan Merrill, which assist companies in preparing filings for the Securities and Exchange Commission.

“For nearly three years, he and his co-conspirators repeatedly hacked into U.S. computer networks to obtain tomorrow’s headlines today. They used that nonpublic information to trade illegally in the shares of hundreds of publicly traded companies,” U.S. Attorney Rachael Rollins said in a Department of Justice announcement of the verdict. “He had the answer key and reaped enormous financial gains with stolen inside information.”

The scheme netted $90 million overall, prosectors said. Klyushin is estimated to have gained $38 million personally, with about two-thirds of that money coming from trades he made for himself, rather than for clients.

Among the companies the perpetrators invested in were Tesla, Roku and Snap Inc. The scheme earned approximately 900 percent gains on investments prosecutors deemed related to insider trading, during a period when the overall market went up about 25 percent.

One of Klyushin’s alleged co-conspirators, Ivan Ermakov, has previously been indicted twice by the federal government, including for allegedly hacking into computers to interfere with the 2016 U.S. presidential election. Ermakov is a former member of the Russian Main Intelligence Directorate (GRU). 

He and three others indicted in the hack-and-trade case remain at large. 

According to Reuters, Klyushin’s attorney in Switzerland — where he was arrested in 2021 — had claimed that legal efforts against his client were motivated by his political connections in Russia and that U.S. and British intelligence officials had previously tried to recruit him.