Russian Black-Market Data Defendant Pleads Not Guilty

A Muscovite accused of being a black-market broker for the most prolific computer hacking ring to hit corporate America entered a not-guilty plea.

Dmitriy Smilianets, 29, appeared today in federal court in Newark, New Jersey, where prosecutors said July 26 he was indicted with three other Russians and a Ukrainian. They are accused of hacking 17 retailers, financial institutions and payment processors, including 7-Eleven Inc., Nasdaq OMX Group Inc., Carrefour SA (CA) and J.C. Penney Co., to steal more than 160 million credit- and debit-card numbers.

Smilianets has been in custody since his arrest in Amsterdam on June 28, 2012, after leaving an Aeroflot flight. His attorney, Bruce Provda, said U.S. agents used an informant to lure him to the Netherlands. On Sept. 7, Smilianets was extradited to the U.S. After that, he negotiated a possible plea agreement for months without reaching one before his indictment, according to court records.

Smilianets appeared in court today with a Russian interpreter. He wore handcuffs shackled to his waist, a green top and orange pants. Provda said his client speaks English well. U.S. District Judge Jerome Simandle asked Smilianets several questions about whether he understood his legal rights, and the defendant answered, “Yes, sir,” in English.

No Bail

The judge didn’t set a trial date, saying he would have a status conference on Dec. 2. Provda said he didn’t object to his client’s continued detention without bail.

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. Smilianets faces as long as 30 years in prison on the most serious charges.

Prosecutors said Smilianets trafficked in personal identifying information such as user names and passwords, means of identification, credit- and debit-card numbers, and personal ID information on cardholders. He sold that information, known by hackers as “dumps,” to resellers, the U.S. said.

The resellers in turn sold the information 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.

An attorney for Rytikov, Arkady Bukh, attended the hearing. Rytikov remains a fugitive in Ukraine, he said.

“My client at this time does not consent to the jurisdiction of the United States, so he cannot be arraigned,” Bukh said in an interview. “He claims he’s not guilty.”

The case is U.S. v. Smilianets, 12-mj-03043, U.S. District Court, District of New Jersey (Newark).

To contact the reporter on this story: David Voreacos in Newark, New Jersey, at dvoreacos@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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