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.”