Five Russians Charged in Hacking and Illegal Trading Scheme
On December 20, 2021, the Securities and Exchange Commission announced fraud charges against five Russian nationals for engaging in a multi-year scheme to profit from stolen corporate earnings announcements obtained by hacking into the systems of two U.S.-based filing agent companies before the announcements were made public.
The SEC’s complaint, filed in federal district court in Massachusetts, alleges that defendant Ivan Yermakov, also known as Ivan Ermakov, used deceptive hacking techniques to access the filing agents’ systems and directly or indirectly provided not-yet-public corporate earnings announcements stolen from those systems to his co-defendants Vladislav Kliushin, Nikolai Rumiantcev, Mikhail Irzak, and Igor Sladkov.
According to the complaint, from 2018 through 2020, the traders used 20 different brokerage accounts located in Denmark, the United Kingdom, Cyprus and Portugal to generate profits of at least $82 million using the stolen information to make trades before over 500 corporate earnings announcements. The defendants allegedly shared a portion of their enormous profits by funneling them through, M-13, a Russian information technology company founded by Kliushin and for which Yermakov and Rumiantcev serve as directors.
For example, according to court documents, during a single two-week period between Oct. 22, 2018 and Nov. 6, 2018, Ermakov or another coconspirator gained unauthorized access into one of the Filing Agent’s computer network using IP addresses hosted at a data center located in Boston, and viewed or downloaded the non-public earnings-related files of several companies, including Capstead Mortgage Corp., Tesla, Inc., SS&C Technologies, and Nevro Corp. Thereafter—days before the companies’ financial results were filed with the SEC and publicly disclosed—Klyushin and other co-conspirators allegedly placed profitable trades in the shares of those companies, buying shares of companies that were about to disclose positive financial results and selling short shares of companies that were about to disclose negative financial results.
The SEC’s complaint charges each of the defendants with violating the antifraud provisions of the federal securities laws and related SEC antifraud rules and seeks a final judgment ordering the defendants to pay penalties, return their ill-gotten gains with prejudgment interest, and enjoining them from committing future violations of the antifraud laws.
The U.S. Attorney’s Office for the District of Massachusetts also announced criminal charges against the five defendants named in the SEC’s action and that defendant Vladislav Kliushin was extradited from Switzerland.
Vladislav Klyushin, of Moscow, Russia, was arrested in Sion, Switzerland on March 21, 2021, while on a family skiing trip to Zermatt, and was extradited to the United States on Dec. 18. Charges were unsealed on December 20th in U.S. District Court in Massachusetts, charging Klyushin with conspiring to obtain unauthorized access to computers to commit wire fraud and securities fraud, obtaining unauthorized access to computers, wire fraud and securities fraud.
Ivan Ermakov and Nikolai Rumiantcev, both of Moscow, Russia, are charged in the District of Massachusetts with conspiring to obtain unauthorized access to computers to commit wire fraud and securities fraud and with obtaining unauthorized access to computers, wire fraud and securities fraud.
Mikhail Vladimirovich Irzak and Igor Sergeevich Sladkov, both of St. Petersburg, Russia, are also charged in the District of Massachusetts with conspiracy to obtain unauthorized access to computers to commit wire fraud and securities fraud, and with securities fraud.
Ermakov, Rumiantcev, Irzak and Sladkov remain at large.
Ermakov, a former officer in the Russian Main Intelligence Directorate (GRU), a military intelligence agency of the General Staff of the Armed Forces of the Russian Federation, was previously charged in July 2018 in federal court in Washington, D.C. for his alleged role in a hacking and influence effort related to the 2016 U.S. elections for hacking into the presidential campaign of Hillary Clinton and the Democratic Party. In October 2018, Ermakov was also charged in a federal court in Pittsburgh in connection with his alleged role in hacking and related disinformation operations targeting international anti-doping agencies, sporting, and anti-doping officials.
For further information about this securities law blog post, please contact Brenda Hamilton, Securities Attorney at 200 E. Palmetto Park Rd, Suite 103, Boca Raton, Florida, (561) 416-8956, by email [email protected] or visit www.securitieslawyer101.com. This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as and does not constitute legal advice on any specific matter, nor does this message create an attorney-client relationship. Please note that the prior results discussed herein do not guarantee similar outcomes.
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Brenda Hamilton, Securities Attorney
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Boca Raton, Florida 33432
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www.securitieslawyer101.com
