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 $90 million.
United States District Judge Patti B. Saris said “it realistically will create general deterrence” for Vladislav Klyushin to be sentenced to prison in this country for that length of time. The judge ordered Klyushin to forfeit $34 million in assets and said she will also require him to make “hefty” restitution to victims of the scheme but will rule later on how much.
The 42-year-old millionaire, “stands convicted of the most significant hacking and trading scheme in American history, and one of the largest insider trading schemes ever prosecuted,” prosecutors wrote in a sentencing memorandum last month. They recommended a 14-year prison term, a $5 million fine, $8.3 million in restitution, and the forfeiture of $36.6 million in assets.
“His co-conspirators remain at large, beyond the reach of law enforcement, where they continue to live off the proceeds of their crimes and are almost certain never to face justice,” wrote Assistant US Attorneys Seth Kosto and Stephen Frank. They argued that a harsh sentence was necessary to deter other cyber criminals and noted that Russia has 44 cyber fugitives on the FBI’s most wanted list, which is more than any other country.
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.
“For more than four decades, Mr. Klyushin did everything right,” Klyushin’s attorneys, Maksim Nemtsev and Marc Fernich, wrote in an August sentencing memorandum. “The conduct at issue in this case should not outweigh a lifetime of good deeds, hard work, kindness, and overall decency and humanity that Mr. Klyushin displayed time and time again.”
Klyushin’s wife, friends and employees wrote letters to the judge describing him as a kind, honest man and urging her to let him come home.
It’s unclear whether Russia would entertain a prisoner swap involving Klyushin. 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.
Klyushin’s name surfaced last year as part of a potential prisoner swap for American basketball star Brittany Griner and former US Marine Paul Whelan. Though Griner was released last December in exchange for convicted Russian arms dealer Viktor Bout, Whelan, who maintains his innocence, remains imprisoned in Russia, serving a 16-year sentence on a charge of espionage.
Klyushin’s Moscow-based company, M-13, employs more than 300 people and provides media monitoring services and cyber security 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
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.
Prosecutors wrote in court filings that Klyushin and his alleged accomplices operated from the safety of Russian, which “does not extradite its own citizens and rarely (if ever) cooperates with American law enforcement in cybercrime matters.”
Yet, 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.
Prosecutors told jurors that Klyushin’s company advertised its ability to simulate cyber attacks to help clients identify vulnerabilities in their computer systems, then used those same techniques to hack into US computer systems.
Defense lawyers argued that Klyushin was financially successful long before he engaged in a single stock market trade. They told jurors that Klyushin’s stock market success was based on research and market analysis, and that he was targeted by the US government because his IT company provides media monitoring and cybersecurity services to the Russian government.
His two codefendants remain in Russia, including Ivan Ermakov, a former Russian military intelligence officer who was previously indicted in 2018 for two alleged computer hacking schemes — one involving the 2016 US presidential election and the other targeting antidoping agencies and officials. He is one of the FBI’s most wanted.
Two other men accused of being investors in the insider trading and hacking scheme are charged in a separate indictment and also remain in Russia.
Shelley Murphy can be reached at shelley.murphy@globe.com. Follow her @shelleymurph.
