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

© Reuters. FILE PHOTO-Vladislav Klyushin, an owner of an information technology company with ties to the Russian government, is seen in an undated photograph attached to a U.S. Department of Justice filing. U.S. Dept. of Justice/Handout via REUTERS/File Photo

By Nate Raymond and Maria Tsvetkova

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 (NASDAQ:TSLA) and Microsoft (NASDAQ:MSFT), 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."

Kosto had sought a 14-year sentence. While Saris did not go that far, the judge said a lengthy sentence was justified for a sophisticated international crime that did "significant harm to the U.S. capital 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.

Asked after the sentencing hearing if Klyushin would be a good candidate for a prisoner swap with Russia, his lawyer Maksim Nemtsev told reporters that his client "potentially" would be, but that he had no personal knowledge of whether that was being discussed.

There is recent precedent for such a swap. Russia released imprisoned American basketball star Brittney Griner last year in exchange for Russian arms dealer Viktor Bout, who was imprisoned in the United States.

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 plans to appeal his conviction.

Prosecutors said that 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. Klyushin and his associates then made $93 million trading stocks based on yet-to-be-announced information that hackers stole from publicly traded companies, according to prosecutors.

Klyushin individually netted more than $34 million in the scheme, prosecutors said. The judge on Thursday ordered Klyushin to forfeit that money, though she suggested it was unlikely most of it would ever be collected.

Nemtsev had sought a three-year prison sentence, which would take into account the 2-1/2 years Klyushin already has been in custody, saying the longer he was in prison the more his client would be robbed of seeing his children in Russia grow up.

"There's no reason to believe he would risk the well-being of his family by committing crimes again," Nemtsev said.

But Kosto said that allowing Klyushin, a "powerful person" with connections to the "highest echelons of Russian society," to return quickly to his home country would be a "recipe for recidivism."

Klyushin's lawyers have argued there was no evidence he possessed inside information and knew of any hacking. Oliver Ciric, his attorney in Switzerland, has 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.