On April 6, 2021, an indictment was issued in the United States District Court for the District of Massachusetts, accusing Vladislav Klyushin, Ivan Ermakov, and Nikolai Rumiantcev with conspiring to obtain unauthorized access to computers and to commit wire fraud and securities fraud, wire fraud, securities fraud, and unauthorized access to computers, as well as aiding and abetting these offenses. According to the indictment, which was unsealed on December 20, 2021, Klyushin, Ermakov and Rumiantcev, all Russian nationals residing in Russia, were deputy general directors of a company called M-13 in Moscow. Klyushin also claimed to be the owner of M-13.
The indictment describes the manner in which Klyushin, Ermakov and Rumiantcev conspired to use their skill at hacking into computer systems to obtain unauthorized access to the networks of two filing agencies — both of them public companies operating in the United States and registered on US stock exchanges — that provided secure communications platforms for preparing and submitting regulatory filings to the US Securities and Exchange Commission. According to the indictment, the hacking activity took place between January 2018 and September 2020. Using passwords stolen from employees of the filing agencies, the defendants were able to view or download the financial disclosures of hundreds of publicly traded companies prior to their filing with the SEC. The indictment alleges that Klyushin, Ermakov and Rumiantcev used the material non-public information contained in the not-yet-filed disclosures and quarterly and annual reports to make lucrative trades, thereby illegally enriching themselves by tens of millions of dollars. Examples of these trades include the October 2018 shorting of Capstead Mortgage Corp. shares based on pre-filing information obtained through unauthorized access to one of the filing agency’s networks, and the purchase of Tesla, Inc. shares prior to the release of positive quarterly earnings results for that company in May 2019, resulting in profits of several million dollars for the defendants and their co-conspirators. In addition to the criminal penalties carried by the alleged violations, the indictment contains forfeiture allegations against each of the defendants.
In a parallel action, the US Securities and Exchange Commission charged Klyushin, Ermakov, Rumiantcev and two other Russian men with violating the antifraud provisions of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder, as well as – with regard to some of the defendants — violations of Section 15(b) of the Securities Act and Section 20(b) of the Exchange Act. Altogether, the SEC alleges that Klyushin, Ermakov, Rumiantcev and their co-defendants Mikhail Irzak and Igor Sladkov reaped unlawful profits of at least $82.5 million through the illegal use of the pre-release earnings announcements obtained by hacking into the computer systems of companies that provide services to publicly traded companies. The SEC complaint seeks a permanent injunction regarding future violations, and an order for the disgorgement of all illicit trading profits, ill-gotten gains and avoided losses resulting from the alleged actions. The SEC also demands a civil penalty up to three times the profits made in connection with the alleged actions.