Another Russian Spy Ring in New York City Busted

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This alleged Russian spy ring was interested in some very dangerous things (Washington Post)

. . . Buryakov, who went by Zhenya and said he worked for a Russian-owned bank in Manhattan, also was involved in one of the few conversations that wasn’t totally clownish, but was, quite simply, terrifying to contemplate. He was interested, according to the indictment, in the “destabilization of the markets” and automated trading algorithms — “trading robots.”

In May 2013, Buryakov and another member of the ring discussed what an unnamed Russian news organization should ask New York Stock Exchange employees “for intelligence gathering purposes,” the indictment said. Chatting over the phone, Buryakov advised that it would be useful to know more about the workings of Exchange Traded Funds — popular investment vehicles for millions of Americans composed of baskets of stocks, such as those in the Dow Jones industrial average or the S&P 500, that are traded like stocks. According to studies, ETFs are approaching $5 trillion in assets.

Buryakov allegedly wanted to know how they are used, the mechanisms of use for destabilization of the markets.”

This was a troublesome line of inquiry. The modern market is awash in such “trading robots,” which use algorithms to buy and sell financial product at speeds difficult to convey. “The acceleration of Wall Street cannot be separated from the automation of Wall Street,” wrote Mother Jones’s Nick Baumann. “Since the dawn of the computer age, humans have worried about sophisticated artificial intelligence … seizing control. But traders, in their quest for that million-dollar millisecond, have willingly handed over the reins. Although humans still run the banks and write the code, algorithms now make millions of moment-to-moment calls in the global markets.”

For evidence of what can go wrong when one of these bots goes crazy, look no further than Aug. 1, 2013. That was when a mid-size trading company named Knight Capital Group lost nearly $10 million per minute over the course of 45 minutes for a total of $440 million. The managers said it was a computer glitch, a misfiring algorithm, a complex computer program gone rogue. . . . (read more)

This Russian News Agency Doubled As a Spy Machine (Daily Beast)

A pair of accused Russian spies tried to gather intelligence about U.S. financial markets, and potentially how to disrupt them, by feeding questions to journalists at the Russian state-owned news agency Tass, The Daily Beast has learned. The agency has a long history of giving cover to Russian spies, current and former intelligence officials say.

A criminal complaint released by the Justice Department on Monday lays out how the spies ran an alleged economic intelligence-gathering operation by developing the questions at the request of the news organization, which isn’t identified in the document, so that journalists could pose them to New York Stock Exchange employees in the course of newsgathering. The operation crossed the line between traditional reporting and espionage, in a blurry terrain where Russian spooks have long been comfortable operating. . . .

. . . Oleg Kalugin, an ex-KGB general who ran the agency’s operations in the United States, said Tass has long been a den of spies. “At least half if not more [of Tass employees] were involved in the intelligence business” during the Cold War, Kalugin told The Daily Beast.

A news organization was an ideal home base for intelligence officers because the essential job of spies and reporters isn’t so different. “Their job was to gather and collect information,” he said of Tass reporters working for the intelligence service. “And they would try to recruit people and obtain classified documents. That was the top of the agenda.” . . . (read more)

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Buryakov, et al Complaint (pdf)

Attorney General Holder Announces Charges Against Russian Spy Ring in New York City (DOJ Press Release)

Spy Ring Attempted to Collect Economic Intelligence and Recruit New York City Residents as Intelligence Sources

Evgeny Buryakov, aka “Zhenya,” Worked Under “Non-Official Cover” as a Bank Employee in Manhattan

“This case is especially egregious as it demonstrates the actions of a foreign intelligence service to integrate a covert intelligence agent into American society under the cover of an employee in the financial sector.”—FBI Assistant Director Randall C. Coleman of the FBI’s Counterintelligence Division

Attorney General Eric Holder, Assistant Attorney General for National Security John P. Carlin, U.S. Attorney Preet Bharara for the Southern District of New York and Assistant Director Randall C. Coleman of the FBI’s Counterintelligence Division announced charges today against Evgeny Buryakov, aka “Zhenya,” Igor Sporyshev and Victor Podobnyy in connection with Buryakov’s service as a covert intelligence agent on behalf of the Russian Federation (Russia) in New York City, without notifying the U.S. Attorney General of Buryakov’s status as an agent of Russia, as required by federal law.

Buryakov was placed under arrest earlier today in Bronx, New York, and is scheduled to appear before U.S. Magistrate Judge Sarah Netburn in federal court in Manhattan later today.

Sporyshev and Podobnyy no longer reside in the United States and have not been arrested. By virtue of their prior positions in the United States on behalf of Russia, both of them were protected by diplomatic immunity from arrest and prosecution while in the United States.

“These charges demonstrate our firm commitment to combating attempts by covert agents to illegally gather intelligence and recruit spies within the United States,” said Attorney General Holder. “We will use every tool at our disposal to identify and hold accountable foreign agents operating inside this country – no matter how deep their cover. I want to thank the dedicated men and women of the FBI’s Counterintelligence Division and New York Field Office, the National Security Division’s Counterespionage Section and the U.S. Attorney’s Office for the Southern District of New York for their skilled handling of this complex and highly sensitive matter.”

The attempt by foreign nations to illegally gather economic and other intelligence information in the United States through covert agents is a direct threat to the national security of the United States, and it exemplifies why counterespionage is a top priority of the National Security Division,” said Assistant Attorney General Carlin. “I want to thank the FBI’s New York Field Office and Counterintelligence Division as well as the U.S. Attorney’s Office for the Southern District of New York for their continued effort to conduct these highly complex and sensitive counterespionage investigations and prosecutions, and for their continued close partnership with the National Security Division and the Counterespionage Section.”

“Following our previous prosecution with the FBI of Russian spies, who were expelled from the United States in 2010 when their plan to infiltrate upper levels of U.S. business and government was revealed, the arrest of Evgeny Buryakov and the charges against him and his co-defendants make clear that – more than two decades after the presumptive end of the Cold War – Russian spies continue to seek to operate in our midst under cover of secrecy,” said U.S. Attorney Bharara. “Indeed, the presence of a Russian banker in New York would in itself hardly draw attention today, which is why these alleged spies may have thought Buryakov would blend in. What they could not do without drawing the attention of the FBI was engage in espionage. New York City may be more hospitable to Russian businessmen than during the Cold War, but my office and the FBI remain vigilant to the illegal intelligence-gathering activities of other nations.”

“This investigation is one of many that highlight the determined and prolific efforts by foreign governments to target Americans for the purposes of collecting intelligence and stealing secrets,” Assistant Director Coleman. “This case is especially egregious as it demonstrates the actions of a foreign intelligence service to integrate a covert intelligence agent into American society under the cover of an employee in the financial sector. Espionage is as pervasive today as it has even been, and FBI counterintelligence teams will continue to aggressively investigate and expose hostile foreign intelligence activities conducted on U.S. soil.”

According to the complaint unsealed in Manhattan federal court today:

Buryakov worked in the United States as an agent of Russia’s foreign intelligence agency, known as the SVR. Buryakov operated under “non-official cover,” meaning he entered and remained in the United States as a private citizen, posing as an employee in the Manhattan office of a Russian bank. SVR agents operating under such non-official cover – sometimes referred to as NOCs – typically are subject to less scrutiny by the host government, and, in many cases, are never identified as intelligence agents by the host government. As a result, a NOC is an extremely valuable intelligence asset for the SVR.

Federal law prohibits individuals from acting as agents of foreign governments within the United States without prior notification to the U.S. Attorney General. Department of Justice records indicate that Buryakov has never notified the U.S. Attorney General that he is, in fact, an agent of Russia.

Sporyshev and Podobnyy are also SVR agents who worked in the United States to gather intelligence on behalf of Russia by posing as official representatives of Russia. From Nov. 22, 2010, to Nov. 21, 2014, Sporyshev served as a trade representative of the Russian Federation in New York. From Dec. 13, 2012, to Sept. 12, 2013, Podobnyy served as an attaché to the Permanent Mission of the Russian Federation to the United Nations. Based on their official government postings on behalf of Russia, Sporyshev and Podobnyy are exempt from notifying the U.S. Attorney General of the true nature of their work. However, that exemption does not permit them to conspire with, or aid and abet, Buryakov in his work as an unregistered agent of Russia operating within the United States.

The intelligence-gathering efforts of Sporyshev and Podobnyy included, among other things, attempting to recruit New York City residents as intelligence sources for Russia; tasking Buryakov to gather intelligence; and transmitting intelligence reports prepared by Buryakov back to SVR headquarters in Moscow. Specifically, during the course of the charged offenses, Sporyshev was responsible for relaying assignments from the SVR to Buryakov, and Sporyshev and Podobnyy were responsible for analyzing and reporting back to the SVR about the fruits of Buryakov’s intelligence-gathering efforts.

The directives from the SVR to Buryakov, Sporyshev and Podobnyy, as well as to other covert SVR agents acting within the United States, included requests to gather intelligence on, among other subjects, potential U.S. sanctions against Russian banks and the United States’ efforts to develop alternative energy resources.

Clandestine Meetings and Communications

During the course of their work as covert SVR agents in the United States, Buryakov, Sporyshev and Podobnyy regularly met and communicated using clandestine methods and coded messages, in order to exchange intelligence-related information while shielding their associations with one another as SVR agents. These efforts were designed, among other things, to preserve their respective covers as an employee of a bank in Manhattan (Buryakov), a trade representative of the Russian Federation in New York (Sporyshev) and an attaché to the Permanent Mission of the Russian Federation to the United Nations (Podobnyy). In particular, the defendants worked to safeguard Buryakov’s work as a NOC.

Sporyshev and Podobnyy acted as covert intermediaries for Buryakov to communicate with the SVR on intelligence-related matters. As an agent posing as someone without any official ties to the Russian government or the SVR, Buryakov was unable to access the SVR New York Office – which is located within an office maintained by Russia in New York City – without potentially alerting others to his association with the SVR. As such, Buryakov required the assistance of other SVR agents, like Sporyshev and Podobnyy, to exchange communications and information with the SVR through the communications systems located in the SVR New York Office.

From as early as March 2012 through as recently as mid-September 2014, the FBI has conducted physical or electronic surveillance of Buryakov and Sporyshev engaging in over 48 brief meetings, several of which involved Buryakov passing a bag, magazine or slip of paper to Sporyshev. These meetings typically took place outdoors, where the risk of effective surveillance was reduced relative to an indoor location.

These meetings were nearly always preceded by a short telephone call between Buryakov and Sporyshev, during which one of the men typically told the other that he had an item to give to him. Typically, during these telephone calls, which were intercepted by the FBI, the item in question was referred to as some non-specific ticket, book, list or other ordinary item (e.g., umbrella or hat).

Subsequently, at each meeting surveilled by the FBI, Buryakov and Sporyshev met and sometimes exchanged documents or other small items. Notably, despite discussing on approximately 12 occasions the need to meet to transfer “tickets,” Buryakov and Sporyshev, were – other than one occasion where they discussed going to a movie – never observed attending, or discussing in any detail, events that would typically require tickets, such as a sporting event or concert. In fact, Buryakov and Sporyshev used this coded language to signal that they needed to meet, and then met to exchange intelligence information.

Attempts by Sporyshev and Podobnyy to Recruit Intelligence Sources in New York City

In numerous recorded communications, Sporyshev and Podobnyy discussed their attempts to recruit U.S. residents, including several individuals employed by major companies, and several young women with ties to a major university located in New York City (University-1), as intelligence sources for the SVR. On these recordings, the defendants discussed the potential value of these sources and identified particular sources by use of a “source name,” which appears to be a coded name. In addition, during these recordings, Sporyshev and Podobnyy discussed the efforts of other SVR agents to recruit a number of other Russian-origin individuals associated with University-1 as intelligence sources.

For example, Sporyshev and Podobnyy discussed Podobnyy’s efforts to recruit a male working as a consultant in New York City as an intelligence source. During this conversation, Podobnyy explained his source recruitment method, which included cheating, promising favors and then discarding the intelligence source once the relevant information was obtained by the SVR: “This is intelligence method to cheat. . . . You promise a favor for a favor. You get the documents from him and tell him to go [expletive] himself.”

In other recorded conversations, Sporyshev and Podobnyy made clear that they worked for the SVR. For example, on Jan. 31, 2013, Sporyshev and another SVR agent not charged in the complaint (CC-1) had a discussion inside the SVR New York Office about their contracts with the SVR. Sporyshev stated that, “Everyone has a five-year contract,” and explained, in response to CC-1’s question about reimbursement for the travel of SVR agents’ family members, that “travel for military personnel and their families on authorized home leave is paid, and in our, in our SVR, this, the payment for getting to and from the duty station.” In addition, on April 25, 2013, Sporyshev and Podobnyy discussed the use of nontraditional cover for Russian intelligence officers and, in particular, the Illegals program that ended with the arrest of 10 “deep cover” SVR agents in July 2010.

Buryakov’s Intelligence Taskings

Sporyshev was responsible for relaying intelligence assignments from the SVR to Buryakov. The FBI obtained electronic recordings of several conversations relating to such intelligence directives being communicated to and carried out by Buryakov in his position as an SVR agent acting under non-official cover. For example, on May 21, 2013, Sporyshev called Buryakov to ask for Buryakov’s help in formulating questions to be used for intelligence gathering purposes by others associated with a leading Russian state-owned news organization (the News Organization). Buryakov responded by supplying Sporyshev with a particular line of questioning about the New York Stock Exchange for use by the News Organization.

Buryakov’s Receipt of Purported Official U.S. Government Documents

In the summer of 2014, Buryakov met numerous times with a confidential source working for the FBI (CS-1). CS-1 posed as the representative of a wealthy investor looking to develop casinos in Russia. During the course of these meetings, and consistent with his interests as a Russian intelligence agent, Buryakov demonstrated his strong desire to obtain information about subjects far outside the scope of his work as a bank employee. During these meetings, Buryakov also accepted documents that CS-1 claimed he had obtained from a U.S. government agency and which purportedly contained information potentially useful to Russia, including information about U.S. sanctions against Russia.

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Buryakov, 39, Sporyshev, 40, and Podobnyy, 27, are charged on two counts. The first count charges the defendants with participating in a conspiracy for Buryakov to act in the United States as an agent of a foreign government without first notifying the Attorney General, and carries a statutory maximum penalty of five years in prison. The second count charges Buryakov with acting in the United States as an agent of a foreign government without first notifying the Attorney General, and charges Sporyshev and Podobnyy with aiding and abetting that offense. The second count carries a statutory maximum penalty of 10 years in prison. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by a judge.

The Attorney General is grateful for the investigative work of the FBI’s Counterintelligence Division.

The prosecution is being handled by Senior Trial Attorney Heather Schmidt of the National Security Division’s Counterespionage Section and Assistant U.S. Attorneys Adam Fee, Ian McGinley and Anna M. Skotko for the Southern District of New York’s Terrorism and International Narcotics Unit.

The charges in the Complaint are merely accusations, and the defendants are presumed innocent unless and until proven guilty.