Insider-Trading Witness Tells How He Bought Stolen Information

Insider-Trading Witness Tells How He Bought Stolen Information

(Bloomberg) -- A prosecution witness called in the case against two men charged in a sweeping inside-trading scheme said he played a central role in the ring and may have committed other crimes along the way.

Arkadiy Dubovoy said, for instance, he didn’t realize it was illegal when he and his son altered financial documents dozens of times to use in real estate purchases. He said he also sometimes used his ice cream company’s accounts to pay traders and hackers who allegedly used stolen press releases to profit on stock trades.

Dubovoy, a 53-year-old Ukrainian businessman, said former Morgan Stanley Vice President and pastor Vitaly Korchevsky pushed to keep what the government called the largest known hacking and securities fraud scheme going when Dubovoy wanted out in 2015. Korchevsky and trader Vladislav Khalupsky were charged with conspiracy and fraud for allegedly making trades on information gleaned from press releases hackers stole from companies including PR Newswire, Business Wire and Marketwired.

Dubovoy said he didn’t realize it was wrong to alter the documents because he had money in other accounts he could transfer if it was needed. He didn’t initially disclose it to government prosecutors because he didn’t realize it was an illegal activity, he said in federal court in Brooklyn, New York.

Defense lawyers honed in on Dubovoy and his son Igor’s testimonies when they found altered financial documents. Both Dubovoys pleaded guilty to wire fraud in 2016 and took a deal with the government to cooperate with investigators in exchange for letters to their sentencing judges.

"But this, Mr. Dubovoy, testifying, is your biggest scam of all?" Korchevsky’s defense attorney Steven Brill asked.

Dubovoy described his work orchestrating the scheme, paying the hackers and making sure Korchevsky and Khalupsky got their cut of the profits.

Defense attorneys also questioned him about his relationship with his cousin’s husband, who was arrested during a narcotics sting in 2009. When pressed, Dubovoy denied involvement.

But he did agree that during the trading scheme, when the group lost access to the stolen press releases, his relative helped reconnect it with the hackers, who both he and his son called "the guys."

Money Web

Igor Dubovoy testified last week about the years he spent assisting his father -- drafting emails, coordinating travel, purchasing devices and sending money to co-conspirators through at least half a dozen company accounts.

Khalupsky’s defense brought up fraud accusations against the younger Dubovoy in Latvia that involved forged bank documents used in an attempt to buy a hotel there.

Last week, the defense wrote a letter to the judge asking for Igor Dubovoy’s testimony to be stricken in its entirety and to preclude his father’s testimony. Instead, the judge allowed defense lawyers to go deeper into the matter during witness cross-examination.

Prosecutors say Korchevsky and Khalupsky used earnings statements and other information from the news releases to inform trades on the stock market, padding ring-member’s pockets with at least $20 million. The pair’s lawyers claim they were kept "in the dark" and didn’t know the true nature of the information.

Nine people were charged in 2015 in connection with the scheme. Of the four charged in Brooklyn, two have pleaded guilty.

The case is U.S. v. Korchevsky, 15-cr-000381, U.S. District Court, Eastern District of New York (Brooklyn).

To contact the reporter on this story: Sydney Maki in Brooklyn at

To contact the editors responsible for this story: David Glovin at, Paul Cox, Joe Schneider

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