When the truth comes out about Dmitriy Smilianets, a Muscovite accused of being a black-market broker for the most prolific computer hacking ring ever to hit corporate America, “it will make a great plot in some TV show or book,” his lawyer says.
For now, though, that truth will have to wait, as Smilianets, 29, is being held in an undisclosed location until he appears in a U.S. courtroom next week.
Investigators used an informant to lure Smilianets into a trap at Amsterdam’s airport, where he was arrested after leaving an Aeroflot flight on June 28, 2012, lawyer Bruce Provda said.
“The informer enticed him out of his safety within Russia,” Provda said. “He was lured into thinking that everything would be fine. I think they wanted him badly. They’re treating him as a very special prize. He’s perfectly capable of teaching new tricks to industry and finance.”
Smilianets was extradited to the U.S. on Sept. 7, prosecutors said, and made a court appearance three days later.
On July 26, prosecutors said he was indicted with three other Russians and a Ukrainian. They are accused of hacking 17 retailers, financial institutions and payment processors to steal more than 160 million credit and debit card numbers. Their targets included 7-Eleven Inc., the Nasdaq OMX Group Inc., Carrefour SA (CA), and J.C. Penney Co., according to prosecutors.
Smilianets’s arraignment is set for Aug. 13 in Camden, New Jersey. At some point after that, Provda said, “It will also come out why this guy is so intensely wanted.”
Smilianets “absolutely intends to fight the charges,” the attorney said. “He’s well-funded through his family and friends. He’s in it for the long run.”
Provda said his client isn’t cooperating with the U.S. Attorney’s Office in Newark, which investigated the case with the U.S. Secret Service.
Records unsealed yesterday show that prosecutors and Smilianets tried for months to reach a plea agreement. Judges ordered delays on Sept. 13, Dec. 3, Jan. 25, March 28 and May 30 to allow talks to craft a deal “which would render any grand jury proceedings and any subsequent trial of this matter unnecessary.”
Because Smilianets was indicted by a grand jury, the talks apparently haven’t borne fruit.
“I asked him specifically if he would cooperate, and he got very upset and said, ‘No,’” Provda said. “At this point, there’s no strategy of cooperation. Could that change in time? Anything can in time, but will it? I doubt it.”
Smilianets is accused of computer hacking conspiracy and conspiracy to commit wire fraud with Vladimir Drinkman, 32, Aleksandr Kalinin, 26, Roman Kotov, 32, and Mikhail Rytikov, 26. All but Rytikov are charged with wire fraud and unauthorized computer access. Drinkman was arrested in the Netherlands the same day as Smilianets and awaits extradition.
Prosecutors said Smilianets sold personal identifying information such as user names and passwords, means of identification, credit and debit card numbers, and personal ID information on cardholders.
He allegedly sold that information, known by hackers as “dumps,” to resellers. They sold it to others who encoded it onto magnetic strips on blank plastic cards that were used to make unauthorized withdrawals from automated teller machines or to buy goods, according to the indictment.
The losses to just three retailers were at least $300 million, according to prosecutors.
“Smilianets was the one who set the price for these dumps, charging $10 for an American credit card number, $50 for your European credit card number, and $15 for your Canadian credit card number,” U.S. Attorney Paul Fishman in Newark said in announcing the charges. “He even offered quantity discounts and discounts to repeat customers. He was also the person who was responsible for distributing and laundering the proceeds.”
Smilianets allegedly directed that payments go through Western Union Co. (WU), MoneyGram International Inc. (MGI), or international wire transfers to accounts controlled by a co-conspirator, identified in the indictment as CC#1, a money exchanger based in Kiev, Ukraine. CC#1 took a fee and transferred money to Smilianets through cash couriers or by WebMoney Corp., an online payment system.
Federal prosecutors in New York in July announced two other indictments against Kalinin. He’s charged with hacking Nasdaq computers and joining another Russian hacker, Nikolay Nasenkov, in hacking Citigroup Inc. (C) and PNC Financial Services Group Inc. (PNC)
When asked at the news conference where Smilianets is being held, Fishman said: “Smilianets is in custody in the United States. I’m not going to say exactly where he’s being held.”
Prosecutors said the other companies hit by the hackers were Discover Financial Services (DFS), Visa Jordan Card Services, News Corp.’s Dow Jones, Global Payment Inc., Euronet Worldwide Inc. (EEFT), Dexia SA (DEXB), JetBlue Airways Corp., Ingenicard U.S. Inc., Hannaford Brothers Co., Heartland Payment Systems Inc. (HPY), Wet Seal Inc. (WTSL), Commidea Ltd. and an Abu Dhabi bank referred to as Bank A.
Smilianets if convicted will face as many as 30 years on the wire fraud conspiracy charge.
“We typically don’t comment on whether a defendant is cooperating or on law enforcement tactics in ongoing cases,” Rebekah Carmichael, a spokeswoman for Fishman, said yesterday in an e-mail.
Provda said his client, who is married with two children, is a self-taught computer expert who is “extremely bright, beyond bright.” He speaks “excellent English” with a slight Russian accent, Provda said.
“The hacking community at the upper echelon is a rather elite group,” Provda said. “If they didn’t pal around, they certainly know each other.”
Smilianets, he said, is “quite adept at computer sciences. I wouldn’t classify him as a hacker.”
Smilianets was represented by another lawyer when Provda got a call at 2 a.m. from someone at the Russian consulate, said Provda, who handles divorces and criminal cases. The caller asked if he would take the case and he agreed, he said. Court records show he entered the case last October.
The lawyer said he has spoken with his client by Skype several times and met him several times. He wouldn’t say where. Provda said his access to Smilianets has been so limited that he complained to the chief judge.
“It is a matter of public record that Smilianets is detained, and all pretrial detainees have access to their attorneys,” said Carmichael, Fishman’s spokeswoman.
When asked if his client sold stolen data, Provda said, “No, absolutely not.”
Still, the lawyer said, “He could offer the government a lot about how this scheme worked, and the government could offer him a lot, like no twenty-plus years. Somewhere along the line, there has to be some trust.”
The case is U.S. v. Smilianets, 2:12-mj-03043, U.S. District Court, District of New Jersey (Newark).
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