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Vladislav Klyushin, a Russian citizen, was found guilty in the U.S. of stealing private earnings reports for a hack-to-trade scam. He was part of a global scheme that earned him $90,000,000.
The defendant hacked the networks of two U.S.-based filing agents for the confidential information. American organizations employ these agents to file earnings reports with the Securities and Exchange Commission (SEC).
The hacked agents had clients like Capstead Mortgage Corp., Tesla, Inc., SS&C Technologies, Roku, and Snap, Inc.
Vladislav Klyushin owned a Moscow-based cybersecurity firm, called M-13. The organization offered penetration testing and APT emulation services.
More About the Hack-to-trade Scheme
Klyushin received money from dubious sources to do trades with the securities of U.S. companies. The fraudulent trades happened between January 2018 and September 2020 on NASDAQ and NYSE. And 97% of them involved companies linked with the two hacked agents.
The stolen reports used in these trades included details about the financial performances of the companies. These provided insights for proven-to-be-true trading predictions.
Armed with this information before it was disclosed to the public, Klyushin and his co-conspirators knew ahead of time, among other things, whether a company’s financial performance would meet, exceed or fall short of market expectations – and thus whether its share price would likely rise or fall following the public earnings announcement. Klyushin then traded based on that stolen information in brokerage accounts held in his own name and in the names of others.
The hack-to-trade scheme made a revenue of $100 million on the stock market. Even after losing $10 million, the return was still 900%. This is way more than the 25% that was usually the return in that period.
Of that amount, Klyushin is estimated to have netted over $38,000,000, with 60.5% being profits from his personal trading activities and the remaining profit coming from indirect investments made on account of others.
The jury found Klyushin guilty, and the sentence will be pronounced on May 4, 2023. He faces up to 30 years in prison, and a $250,000 fine, or twice the amount that he gained illegally.
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