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As one Russian flies home in Griner prisoner swap, another sits in a South Shore jail awaiting trial in a financial hacking case

The head of a Moscow-based IT firm is scheduled for trial in Boston next month on charges he oversaw hacking that let his company make stock trades on American companies hours before they were scheduled to release news that could affect their prices - hacking allegedly done by employees, including one who faces charges of interference with the 2016 elections.

Vladislav Klyushin, who is now scheduled for trial in US District Court on Jan. 13, has been held at the Plymouth County Correctional Facility in Plymouth since December, 2021, after he was extradited to the US following his arrest as he and his family walked from a private jet to a private helicopter for a Swiss skiing vacation earlier that year.

Prosecutors charge that that Klyushin, who has a medal and commendation signed by Vladimir Putin, oversaw employees who figured out how to hack into servers run by American companies that coordinate the publication of financial news releases for publicly held corporations - letting them net what the government says was more than $80 million in profits by making trades in their stock before their news was released.

He is charged with conspiring to obtain unauthorized access to computers, and to commit wire fraud and securities fraud, and with obtaining unauthorized access to computers, wire fraud and securities fraud, which, if he is convicted, could mean a sentence of up to 80 years. The SEC has filed a separate lawsuit against him over the allegations, although that case was closed in September, pending the outcome of the criminal case.

US District Court Judge Patti Saris last week rejected a request by Klyushin to toss evidence from his Apple iCloud account and iPhone and to dismiss a securities-fraud charge against him.

Klyushin charged the government didn't have probable cause for the search warrants that let them get the data, because some of the statements used to justify them were too vague and that they grabbed a lot of personal information having nothing to do with the case.

Saris acknowledged that one part of the affidavit was too vague to show the government had a legitimate reason to seek the information from Apple, but said that was far outweighed by all the other evidence the FBI had collected that proved it needed access to data that might be stored in the cloud or on Klyushin's phone:

The affidavits show that (1) there was an ongoing scheme, in which Irzak [one employee] participated, that involved hacking into the Filing Agents' computer networks to obtain and trade on MNPI, including Avnet's MNPI; (2) Ermakov [another employee, the one charged with election interference] , a known hacker, had also traded in Avnet on the day of its earnings announcement; and (3) Ermakov had used Klyushin's account to make the Avnet trades and had corresponded with Klyushin repeatedly via phone in the months after the Avnet trades. A commonsense evaluation of these facts indicates that a fair probability existed that Klyushin's iCloud account would contain evidence of the Avnet trades as part of the hack-and-trade scheme. Once the fruits of the September 29 Search Warrant showed that Klyushin's initial iCloud account was locked but that his phone was associated with the Apple ID 1093366326, there was also probable cause to search that second iCloud account.

Saris agreed that agents might have collected information not related to the case, but said that was not uncommon with both electronic and physical searches and that prosecutors had cured the problem by agreeing to use anything it found as evidence that was dated before 2018, when the alleged hacking started.

Saris also rejected Klyushin's request to dismiss the securities-fraud charge, saying that while it is true, as Klyushin's lawyer argued, he "did not have fiduciary duty to the companies he took information from or those whose securities he traded in," that doesn't matter, because other courts have held that's only a requirement for insider trading, not for other types of security fraud. She ruled that "affirmatively misrepresenting one’s identity to access, steal, and trade on confidential information is deceptive" within the meaning of the federal security-fraud law and so prosecutors can try to make the case to a jury that he is guilty of that.

Saris's ruling is the latest pre-trial defeat for Klyushin. He initially sought to be transferred from the Plymouth prison to an apartment in the Seaport so he could be closer to the federal courthouse and have more time to work with the large number of documents involved in the case. He said he would agree to pay for a 24-hour watch by a private security firm - and to have his wife and children join him here.

But both a magistrate judge and then Saris sided with prosecutors, who said that he had no ties to the area and it would just be too easy for a well off man with plenty of international travel experience to get on a boat at a nearby dock and be ferried out of US jurisdiction.

Prosecutors have not said why they decided to try Klyushin in Boston. None of the companies whose information was allegedly purloined are in the Boston area. Court filings, however, show that his company's alleged hacking was done through a Boston-area data center.

Innocent, etc.

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They just need to grab one more random US citizen off the street and Klyushin will be on his way home or skiing in Switzerland.

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