Nature of the Case
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Facts
Arkadiy and Pavel Dubovoy approached Korchevsky (D), a hedge fund manager and investment advisor, to seek his help implementing a scheme to use nonpublic information to trade on the stock market. Hackers in Ukraine hacked into three newswires (PR Newswire, Marketwired, and Business Wire) that disseminate press releases from publicly traded companies. The stolen releases were saved to a web-based server that the Dubovoys had access to. Korchevsky (D) looked at the releases and agreed that advanced information of the sort could be traded profitably. Arkadiy opened and funded brokerage accounts, in which Korchevsky (D) would trade. Arkadiy's son, Igor Dubovoy, equipped Korchevsky (D) with computers, phones, and a software program enabling easy access to the server hosting the stolen releases. From January 2011 until February 2015, Korchevsky (D) executed advantageous trades using the stolen press releases. Most of the trading was done after the press release was uploaded to a newswire's internal computer system but before it was publicly disseminated. The trading position was closed after the release became public and the market had reacted to its contents. Korchevsky (D) amassed roughly $15 million in net profits-a 1,660% return on investment-in Arkadiy's brokerage accounts. Khalupsky (D) owned a trading company in Ukraine and used its employees to conduct trading as part of the charged scheme. The Dubovoys shared the stolen releases with Khalupsky (D), funded brokerage accounts in Arkadiy's name, and paid Khalupsky (D) a piece of the profits. These trades, too, were generally initiated in-window. These trades yielded roughly $3.1 million in net profits during the scheme. Greed destroyed the scheme. The Dubovoys opened other trading accounts too in order to avoid paying the hackers’ shares of the gains. The hackers grew suspicious and, in early 2014, stopped sending stolen press releases to the Dubovoys. By late 2014, the Dubovoys found another Ukrainian hacker to steal pre-publication press releases. and the scheme continued, albeit in a modified form. On August 15, 2015, a grand jury returned an indictment charging Ds with conspiracy to commit wire fraud, conspiracy to commit securities fraud, securities fraud, in violation of 15 U.S.C. §§ 78j(b) and 78ff ; and money laundering conspiracy, in violation of 18 U.S.C. § 1956(h). A second grand jury returned a superseding indictment, replicating the first one but adding computer intrusions as an object of the conspiracy to commit securities fraud charge in Count Two. Ds were convicted on all counts. The district court sentenced Khalupsky (D) to four years' imprisonment to be followed by two years' supervised release and ordered him to forfeit $397,281.12 and pay $339,062.99 in restitution. It sentenced Korchevsky (D) to five years' imprisonment to be followed by three years' supervised release and ordered him to forfeit $14,452,245 and pay $339,062.99 in restitution. Ds appealed.
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