Russian gets 9 years for hacking, insider trading
Scheme netted $93 million
The owner of a Russian technology company with ties to the Kremlin was sentenced Thursday to nine years in prison for running an international hacking and insider trading scheme from his homeland that stole confidential information from American companies and netted more than $93 million.
Vladislav Klyushin, who turns 43 on Friday, was also ordered to forfeit $34 million in assets and told that he’ll have to make “hefty” restitution to victims of the scheme, but that amount won’t be determined until later.
US District Judge Patti B. Saris said the scheme caused harm to United States capital markets and to two firms whose computer systems were hacked. She believed that keeping Klyushin imprisoned in the United States for years “realistically will create deterrence.”
However, she rejected the government’s request for a 14year prison term for Klyushin, noting that the father of five children had no prior record and had been described in letters by family and friends as a generous benefactor to charitable causes and his community.
In July, the Washington Post reported that President Biden said he’s serious about pursuing a prisoner exchange for Evan Gershkovich, a Wall Street Journal reporter who was detained in Russia on March 29 while on a reporting trip and accused of espionage. It’s unclear whether Russia and the United States would entertain a prisoner swap involving Klyushin now.
After Thursday’s sentencing, Klyushin’s attorney, Maksim Nemtsev, said he had not been approached by officials about an exchange involving his client, but believed “he’s a potential candidate for a trade.”
Klyushin, who is being held at the Plymouth County jail, received a visit from the Russian ambassador in May or June and also received visits from Russian diplomats, according to Nemtsev.
Klyushin’s Moscow-based company, M-13, employs more than 300 people and provides media monitoring services and cybersecurity testing to private and public entities, including the Russian government. He has a law degree, previously worked as a professor at the Moscow State Linguistic University, and was awarded a Medal of Honor by Russian President Vladimir Putin several years ago.
“The defendant is a powerful person,” Assistant US Attorney Seth Kosto told the judge during Thursday’s hearing. “He has powerful friends in the highest echelons of Russian society.”
He argued that Klyushin was convicted “of the most significant hacking and trading scheme in American history,” but has not accepted responsibility and most of the money he netted remains in Russia.
Defense lawyers described Klyushin as a successful businessman and devoted father who had no prior criminal record and lived the Russian dream — overcoming a childhood of poverty to work his way through law school and business management school. They argued in court filings that “he did not direct or devise any intrusions” or trading related to the case and urged Saris to sentence him to no more than three years in prison.
In February, a federal jury in Boston found Klyushin guilty of conspiracy, wire fraud, unauthorized access to computers, and securities fraud. But his sentencing was delayed for months as the judge considered and ultimately rejected his claim that the government lacked jurisdiction to prosecute him in Boston. Prosecutors alleged that at least one computer address involved in the hacking scheme was based in Boston, paving the way for his trial in federal court.
In March 2021, Klyushin was arrested in Switzerland at the request of US authorities when his chartered jet landed on the tarmac, where a helicopter was waiting to whisk him and his family to a luxury ski resort in the Alps. Swiss authorities extradited him to Boston nine months later, rejecting the Russian government’s request to send him home instead.
During the trial, prosecutors presented evidence that between 2018 and 2020, Klyushin and two other Russian nationals who worked for his company hacked into computer networks of Donnelley Financial Solutions and Toppan Merrill, two firms that publicly traded companies use to make filings to the Securities and Exchange Commission. They were accused of downloading earnings reports of many companies — including Tesla, Snap, Kohl’s, and HubSpot — before they were made public and using that information to make stock trades. The scheme netted a profit of more than $90 million on about $9 million in investments, while Klyushin personally earned more than $33 million, prosecutors alleged.
Lisa Bilcik, general counsel for Toppan Merrill, told the judge Thursday that the cyberattack had a devastating impact on the company, which went through “a grim and stressful time” while investigating the hacks amid the pandemic and lost the business of one of its largest customers.
Prosecutors urged the judge to order Klyushin to pay restitution of $8.3 million to the two companies. Saris deferred a restitution ruling until December.
Klyushin will receive credit for the time he’s already spent in prison. His attorney said he’s appealing his conviction.
Klyushin was convicted ‘of the most significant hacking and trading scheme in American history.’