United States v. Korchevsky
19-197 (L)
| 2d Cir. | Jul 19, 2021Background
- From 2011–2015, Ukrainian hackers stole pre-publication press releases from newswires (PR Newswire, Marketwired, Business Wire) and put them on a shared server; the Dubovoy brothers acted as intermediaries selling access to traders.
- Korchevsky and Khalupsky received stolen releases or login credentials, traded “in-window” (after release uploaded but before public dissemination), and split profits with the intermediaries; combined illicit net profits exceeded $18 million.
- Evidence included account funding by the Dubovoys, devices and forensic reports, broker/clearing relationships, and messaging about trades and profit splits.
- Superseding indictment charged conspiracy to commit wire fraud, conspiracy to commit securities fraud and computer intrusions, substantive securities fraud (10b-5), and money‑laundering conspiracy; both defendants were convicted after a jury trial.
- On appeal they challenged sufficiency of evidence for conspiracy and securities fraud, EDNY venue for securities counts, alleged constructive amendment/variance, the district court’s conscious‑avoidance jury instruction, and the court’s response to a jury note.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Sufficiency of evidence for a single conspiracy | Govt: evidence showed both defendants knowingly participated in a collective venture run through the Dubovoys and hackers | Korchevsky: he did not know Khalupsky and thus could not be in the same conspiracy | Affirmed — co‑conspirators need not know each other; record showed awareness of a larger organization and common goal. |
| Substantive securities fraud (10b‑5) and deception via hacking | Govt: outsiders’ use of hacked, pre‑publication releases was a deceptive scheme "in connection with" securities transactions; stolen credentials/unauthorized access were deceptive devices | Korchevsky: no fiduciary duty and hacking was not a deceptive device aimed at investors | Affirmed — fiduciary duty not required for outsider scheme; using stolen credentials to access off‑limits information is deceptive under 10b‑5. |
| Venue for securities fraud in EDNY | Govt: defendants foresaw trades/clearing/counterparties in EDNY; evidence showed many trades cleared or possibly matched to EDNY counterparties | Defs: insufficient nexus to EDNY for the securities counts | Affirmed — venue proper where acts in furtherance occurred or were foreseeable (clearing agents, counterparties, DTCC connections supported EDNY venue). |
| Conscious‑avoidance jury instruction | Govt: instruction proper as alternative to actual knowledge given evidence of high probability defendants knew releases were stolen | Defs: no factual predicate and instruction risked allowing conviction on conspiracy/aiding/abetting without required intent | Affirmed — factual predicate existed; instruction did not relieve govt of conspiracy/aiding‑and‑abetting intent requirements and any error was harmless. |
Key Cases Cited
- United States v. Flores, 945 F.3d 687 (2d Cir. 2019) (standard for sufficiency review; deference to jury)
- United States v. Sureff, 15 F.3d 225 (2d Cir. 1994) (single conspiracy may include members unaware of each other’s identities)
- United States v. Maldonado‑Rivera, 922 F.2d 934 (2d Cir. 1990) (conspiracy requires awareness of general nature and extent)
- United States v. McDermott, 245 F.3d 133 (2d Cir. 2001) (vacated conviction where defendant lacked awareness of broader scheme)
- S.E.C. v. Dorozhko, 574 F.3d 42 (2d Cir. 2009) (using stolen credentials and misrepresenting identity is deceptive under securities law)
- Zandford, 535 U.S. 813 (U.S. 2002) (scheme to defraud need only coincide with sale/purchase of securities)
- United States v. Lange, 834 F.3d 58 (2d Cir. 2016) (venue for securities fraud where defendant caused or foresaw acts in district)
- United States v. Chow, 993 F.3d 125 (2d Cir. 2021) (venue and related issues in insider/securities prosecutions)