Vitaly Korchevsky, a former hedge fund manager, was sentenced in federal court in Brooklyn today by United States District Judge Raymond J. Dearie to 60 months’ imprisonment for conspiracy to commit wire fraud, conspiracy to commit securities fraud and computer intrusion, conspiracy to commit money laundering and two counts of securities fraud. The Court also ordered Korchevsky to pay $14.4 million in forfeiture and a $250,000 fine. Co-defendant Vladislay Khalupsky, a securities trader, was convicted of the same charges, and was sentenced on January 11, 2019 to 48 months’ imprisonment.

Following a four-week jury trial, Korchevsky and Khalupsky were convicted in July 2018 for their roles in an international scheme to hack into three newswire services and steal press releases containing non-public financial information prior to their publication. The defendants and their co-conspirators then used this information to make trades generating approximately $30 million in illegal profits

Richard P. Donoghue, United States Attorney for the Eastern District of New York, William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI), and David E. Beach, Special Agent-in-Charge, United States Secret Service, New York Field Office (USSS), announced the sentences.

“Korchevsky and Khalupsky will now pay the price for using their experience as traders to generate millions of dollars in unlawful trades based on hacked information,” stated United States Attorney Donoghue. “Today’s sentence sends a powerful message that, no matter how sophisticated or novel the scheme, cybercriminals and traders who steal information from U.S. companies and undermine the integrity of our financial markets will be held accountable for their actions.” Mr. Donoghue expressed his grateful appreciation to the United States Attorney’s Office for the District of New Jersey (USAO-DNJ), the Department of Homeland Security (DHS) and the U.S. Securities and Exchange Commission (SEC) for their significant cooperation and assistance in this case.

“The Secret Service remains committed to aggressively investigating and pursuing those responsible for cyber-enabled financial crimes,” stated USSS Special Agent-in-Charge Beach. “The sentence today is testament to the Secret Service’s commitment to building strong partnerships between local, state and federal law enforcement and represents a win against those who chose to threaten the financial infrastructure of the United States.”

Between February 2010 and August 2015, computer hackers based in the Ukraine gained unauthorized access into the computer networks of Marketwired L.P., PR Newswire Association LLC and Business Wire, through a series of sophisticated cyberattacks. The hackers moved through the computer networks and stole press releases about upcoming announcements by public companies concerning earnings, revenues and other material non-public information.

In order to monetize that information, the hackers shared the stolen press releases with a network of traders, including Korchevsky and Khalupsky, through overseas computer servers controlled by the hackers, and/or through secure email accounts. Korchevsky and Khalupsky then generally traded ahead of the public distribution of the stolen releases, executing trades in extremely short windows of time, usually shortly after the close of the markets. As a result, the trading data often showed a flurry of trading activity around a stolen press release just prior to its public release. Korchevsky, Khalupsky and their co-conspirators traded on stolen press releases concerning hundreds of publicly traded companies.

The illegal trading by the criminal network resulted in gains of more than $30 million, much of which was routed back to the hackers. Korchevsky traded on the stolen press releases both in brokerage accounts that benefitted the criminal network, as well as in his personal brokerage accounts, and ultimately netted approximately $15 million in profits over the course of the scheme. Khalupsky primarily traded in accounts that benefited the criminal network, and received a percentage of the multi-million dollars in profits he generated by trading on the stolen press releases. He directed that payments received for the illegal profits he generated for the criminal network be made to offshore shell companies.

The charges against Korchevsky and Khalupsky were set forth in an indictment unsealed in August 2015 in connection with a broader investigation conducted by this Office, the USAO-DNJ, the FBI, the USSS and the DHS, as well as a parallel investigation by the SEC. In total, nine defendants were charged criminally for their roles in the scheme. All have either pleaded guilty or been convicted at trial, except for three defendants who remain at large.

The government’s case is being handled by the Office’s Business and Securities Fraud Section and National Security and Cybercrime Section. Assistant United States Attorneys Richard M. Tucker, Julia Nestor and David Gopstein are in charge of the prosecution. Assistant United States Attorney Tanisha Payne is in charge of forfeiture aspect of the case.

The Defendants :

VITALY KORCHEVSKY

Age: 53

Glen Mills, Pennsylvania

VLADISLAV KHALUPSKY

Age: 48

Brooklyn, New York and Odessa, Ukraine

E.D.N.Y. Docket No. 15 CR 381 (RJD)