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Pastor, ex-Morgan Stanley VP accused of fraud is also a victim, lawyer says

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Amid a court gallery packed with at least a dozen supporters, the lawyer for a pastor and former Morgan Stanley vice president began wrapping up the clergyman’s defense of insider-trading and fraud charges.

Steven Brill said his client, Vitaly Korchevsky, was actually among the victims in a plot involving Ukrainian hackers who allegedly stole thousands of press releases from hundreds of companies from news-wire company servers. Korchevsky and trader Vladislav Khalupsky are accused of making millions of dollars buying and selling stocks on the news releases before they were publicly distributed.

“This is where Mr. Korchevsky’s American dream became an utter nightmare,” Brill said in his closing arguments Tuesday in federal court in Brooklyn, New York. He accused the government of sensationalizing evidence of wire transfers and checks without actually tying Korchevsky to illicit activities.

Earlier in the trial, prosecutors had presented testimony from an SEC financial economist, who studied the trades and found many were placed within windows of time after companies transmitted potentially market-moving news releases to electronic vendors.

Brill rejected that theory.

“That doesn’t mean he knows about the upload time,” Brill said of his client, a pastor at the Slavic Evangelical Baptist Church in suburban Philadelphia. “It just means he’s an earnings trader.”

Mildred Whalen, Khalupsky’s attorney, told jurors her client could have sent himself images of pre-distribution press releases not because he was involved in crooked trading, but because he caught one of his employees with it and was deciding what to do next. Prosecutors said the images were sure evidence of Khalupsky’s guilt in the scam.

“The evidence in this case is that Mr. Khalupsky is an honest businessman” who was taken advantage of by the Dubovoys, a father-son team that orchestrated the international ring of hackers, traders and middlemen, Whalen said Tuesday afternoon. “Mr. Khalupsky was someone they saw as a chump from the start.”

Korchevsky’s lawyer followed the summation from U.S. prosecutors.

“Deception permeates the scheme, and the defendants were a part of it all,” said Julia Nestor, an assistant U.S. attorney. “The single most important goal was to make money.”

She said both men worked in conjunction with “money men” Arkadiy Dubovoy, who orchestrated the scheme, and his son Igor, who managed much of the logistics for his father. The Dubovoys pleaded guilty in 2016 and testified as government witnesses.

Korchevsky’s return on investment was 116% over the course of the scam, and Khalupsky saw returns as high as 124% in one of the accounts he traded in on behalf of Arkadiy Dubovoy, according to prosecutors. Another prosecutor, Assistant U.S. Attorney Richard Tucker, said “there is no innocent explanation” for Korchevsky’s trading patterns.

“Both defendants knew that this scheme had to be covert,” Nestor argued, referring to evidence showing the use of burner phones and Internet hotspots, as well as the deletion of texts and emails. Later, Korchevsky sent coded texts to make trade recommendations on the stolen information, she said.

“The defendants stole, and they cheated,” Nestor told the jury. “It’s that simple.”

Jurors are likely to begin deliberations later this week.

Bloomberg News