Russian businessman gets 9 years in US prison for hack-and-trade scheme

By Nate Raymond

BOSTON (Reuters) – A Russian businessman with ties to the Kremlin was sentenced on Thursday to nine years in a U.S. prison after being convicted of participating in a $93 million insider-trading scheme involving hacked secret earnings information about multiple companies.

Vladislav Klyushin, the owner of a Moscow-based information technology company called M-13 that did work for the Russian government, was sentenced by U.S. District Judge Patti Saris in Boston after a jury found him guilty in February.

Hackers from 2018 to 2020 viewed and downloaded yet-to-be-announced earnings reports for hundreds of companies including Tesla and Microsoft, which Klyushin and others used to trade before the news was public, according to prosecutors.

“The defendant’s massive gains here came out of other investors’ pockets,” Assistant U.S. Attorney Seth Kosto said during the sentencing hearing. “That does real injury to American markets.”

Klyushin, 42, is one of the highest-profile Russians in U.S. custody. And while his case predated the Russian invasion of Ukraine last year ordered by President Vladimir Putin, Klyushin’s connections to the Kremlin have long intrigued American authorities.

M-13 not only did work for Putin’s government but also employed Ivan Ermakov, a former Russian military intelligence officer wanted by the American government for his alleged involvement in hacking schemes aimed at interfering in the 2016 U.S. presidential election, according to prosecutors.

Ermakov was charged along with Klyushin and three other Russian nationals with carrying out the hack-and-trade scheme. Only Klyushin has faced trial after he was apprehended in Switzerland during a ski trip in 2021 and extradited to the United States. Klyushin is expected to appeal his conviction.

During the hearing, Kosto urged a sentence of 14 years in prison, telling the judge that letting Klyushin return soon to Russia would be a “recipe for recidivism” and calling the defendant a “powerful person” with connections to the “highest echelons of Russian society.”

Maksim Nemtsev, Klyushin’s lawyer, said a lengthy sentence would rob his client of his ability to be with his children in Russia during their childhood.

“There’s no reason to believe he would risk the well-being of his family by committing crimes again,” Nemtsev said, as he asked for a three-year sentence that would take into account the 2-1/2 years he already has been in U.S. custody.

Klyushin’s lawyers have argued there was no evidence he possessed inside information and knew of any hacking. Oliver Ciric, his attorney in Switzerland, said the real reason Klyushin was charged was his Russian government connections. Ciric has said U.S. intelligence officials tried to recruit Klyushin in 2019 and that British intelligence did the same a year later.

Klyushin and his associates made $93 million trading stocks based on yet-to-be-announced information that hackers stole from publicly traded companies, according to prosecutors. The hackers broke into the networks of two firms that help publicly traded companies file reports with U.S. securities regulators, Donnelley Financial Solutions and Toppan Merrill, prosecutors said.

The stolen financial information about those companies allowed Klyushin to turn a $2 million investment into nearly $21 million and the group as a whole to turn about $9 million into $93 million, prosecutors added.

(Reporting by Nate Raymond in Boston; Editing by Will Dunham and Alexia Garamfalvi)