Is The US Preparing To Blame The Next Market Crash On "Russian Spies" And HFT?

Tyler Durden's picture

As reported yesterday, in a surprise announcement late in the day, and shortly before the S&P downgraded Russia to junk (perhaps as part of the fine-print of its $1.5 settlement with the DOJ for daring to downgrade the US in 2011), the US Department of Justice announced it had busted a Russian spy ring in New York City, where at least one of the three people was said to be involved with finance and potentially, capital markets.

Specifically, the DOJ announced "charges 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."

On the surface this sounds like your plain vanilla diplomatic escalation, in which a lowly spy, or rather alleged spy, is exposed to show the displeasure of the host regime toward the opposing country, an action which will surely result, within 24-48 hours, in a comparable arrest of a US spy in Russia.

And yet, reading through the complaint we were dumbfounded when we encountered the following exchange:

On or about May 21, 2013, IGOR SPORYSHEV, the defendant, called EVGENY BURYAKOV, a/k/a "Zhenya," the defendant, 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").

 

From my training and experience, I know that the News Organization has been publicly identified by former SVR agents as an organization that is sometimes used by Russian intelligence to gain access to and gather intelligence under the cover of the news media.

 

During the May 21, 2013 telephone call between EVGENY BURYAKOV, a/k/a "Zhenya," and IGOR SPORYSHEV, the defendants, which was intercepted by the FBI, the following exchange occurred:

 

EVGENY BURYAKOV ("EB"): Hello?

IS: Hello Evgeny.

EB: Hey.

IS: Can you talk? .    . I need help.

EB: Aha.

IS: [The News Organization] wants very much, I don't know how it came down from the top, but they need three questions with regard to the New York Exchange. What would be interesting to us. Can you help write something?

EB: It's a difficult question.    . I need to think.

IS: Can you think of something in fifteen minutes?

EB: Fifteen minutes?

IS: Yes.

EB: I'll try. . . . Should I call you?

IS: Yes, call me.

EB: If you will not pass by me?

IS: No, I will not.

 

* * *

 

Approximately 20 minutes later, IGOR SPORYSHEV, the defendant, called EVGENY BURYAKOV, a/k/a "Zhenya,"the defendant, and the following conversation, which was intercepted by the FBI, occurred:

 

EB: Well, I thought about it. I don' t know whether it will work for you but you can ask about ETF. . . . E-T-F. E, exchange.

IS: Yes, got it.

EB: How they are used, the mechanisms of use for destabilization of the markets.

IS: Mechanism - of - use - for - market - stabilization in modern conditions.

EB: For destabilization.

IS: Aha.

EB: Then you can ask them what they think about limiting the use of trading robots. . . . You can also ask about the potential interest of the participants of the exchange to the products tied to the Russian Federation.

* * * 
Based on my training, experience, and participation in this investigation, I believe that, in this conversation, IGOR SPORYSHEV, the defendant, asked for, and obtained from, EVGENY BURYAKOV, a/k/a "Zhenya," the defendant, questions of interest to the Russian economic intelligence community that were to be used by others associated with the News Organization. SPORYSHEV began the conversation by asking for help ("I need help") . SPORYSHEV said that a request came down from leadership, which I believe to be a reference to the SVR leadership, to pass three questions regarding the New York Stock Exchange to the News Organization ("[The News Organization] wants very much . . . it came down from the top, but they need three questions with regard to the New York Exchange")

 

In a notable departure from every other intercepted conversation involving these two men, IGOR SPORYSHEV, the defendant, made it clear in this call that the two men did not have time to meet in person to discuss this intelligence assignment. Rather, SPORYSHEV asked EVGENY BURYAKOV, a/k/a "Zhenya," the defendant, to get back to him within "fifteen minutes" ("Can you think of something in fifteen minutes?"). BURYAKOV then suggested he would call SPORYSHEV back but only if SPORYSHEV was unable to meet in person (IS: "Yes, call me."; EB: "If you will not pass by me?") . I believe that this time pressure is the reason that this particular intelligence assignment was relayed over a telephone line rather than in person.

 

IGOR SPORYSHEV, the defendant, then called EVGENY BURYAKOV, a/k/a "Zhenya," the defendant, back to supply a particular line of questioning for use by the News Organization. Specifically, BURYAKOV said the News Organization could ask about how the New York Stock Exchange ("NYSE") used exchange-traded funds or "ETF"; potential limits on the use of high-frequency, automated trading systems ("trading robots") ; and the potential interest among NYSE members to products tied to Russia ("products tied to the Russian Federation").

 

Based on my training and experience, and my familiarity with this investigation, I believe that neither defendant' s cover position - banker (EVGENY BURYAKOV, a/k/a "Zhenya," the defendant) and a Trade Office representative (IGOR SPORYSHEV, the defendant) - involves providing assistance to Russian journalists. Nor do their covers explain why the two men would be engaging in a discussion about crafting questions that "would be interesting to us" and that the News Organization representatives should put to New York Stock Exchange employees.

Absurdity of the entire exchange aside, because when one "spy" ask another "spy" whether he "can ask about ETF. . . . E-T-F. E, exchange... How they are used, the mechanisms of use for destabilization of the markets" to which the other replies with "Mechanism - of - use - for - market - stabilization in modern conditions" and is promptly corrected "For destabilization" and when the first one further inquires about "what they think about limiting the use of trading robots", it simply reeks of a scripted conversation.

Worse, when the supposed originator of this line of inquiry is none other than the modern KGB i.e., the Foreign Intelligence Service, i.e. the SVR, because as the FBI special agent on the case says "SPORYSHEV said that a request came down from leadership, which I believe to be a reference to the SVR leadership, to pass three questions regarding the New York Stock Exchange to the News Organization", one has to wonder if the Russian KGB couldn't just open a blog - say this one - or even read a book - say that of Michael Lewis' - to understand all they need to know about just how "robots" and "E-T-Fs" destabilize markets. No, they had to use a network of spies to get to the bottom of just how rigged the market is.

So we will leave aside questions of just what this supposed spy bust is supposed to achieve, with the FBI having now exposed a ground-level apparatchik, who clearly knows nothing and needs pointers on "trading robots", and ending the FBI's ability to trail his activities in the future as well as to potentially get to his superiors - which is always the main prerogative in spy cases such as this one - one thing has become abundantly clear: the scapegoating plan for the "blame game" once the next, devastating, market crash takes place, will be simple: first, blame the E-T-Fs and the "trading robots" for the destabilization (but not the central banks, never the central banks), and then, just to kill all birds with one stone: blame it on the Russian spies.

Sadly, yes: bad B-grade movie scripts from the 80's is just how one would describe the current administration (complete lack of) imagination and foresight. Then again, what else can one expect when none other than the president relied on the "stupidity of the American voter" to pass his career-defining "Affordable" Care Act?

* * *

The full complaint in the case of "Attorney General Holder Announces Charges Against Russian Spy Ring in New York City" can be found here, and in the embedded document below.

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InjectTheVenom's picture

>>>>  Putin

>>>>  Obama

Soul Glow's picture

Who cares, both are puppets for vast monied interests.

SoberOne's picture

I've seen this movie before. Jack Ryan, what say you?

Latina Lover's picture

I read through the FBI complaint. What I found interesting was that the supposed Russian spy was seeking ECONOMIC data, not corporate or military secrets. As pointed out above, nearly all of this info is open source.  Perhaps the supposed spy was trying to steal the REAL economic data, not the BS fed to the masses.

Anyways the timing is suspicious.  To me this is just another PR stunt against Russia.

pods's picture

Caught him running a seach on BLS.gov for "real data."

pods

McMolotov's picture

The talk about "trading robots" makes me miss RobotTrader.

Skateboarder's picture

No one arrested Blythe Masters for coming up with CDS...

kliguy38's picture

Thats because she dots her i's and crossed her Ts and spread her legs

MillionDollarBonus_'s picture

 

The 21st century has seen a shocking rise in cyberterrorism targeted at governments, corporations and innocent citizens. The internet is an unregulated playground, where hackers can do as they please and intolerant cyber-bullies and trolls can torment their victims without fear of repercussions. Our politicians are mostly of the older generations, and they do not truly understand the internet and its dangers to society. We need a new generation of cyber-police, sourced from the best most upstanding technologists of generation X. This group of young men and women should be tasked with designing and enforcing a bullet proof regulatory framework that monitors internet traffic and reports all malicious activity directly to law enforcement. We will then be able to enjoy the good parts of the internet, like reading the news, watching movies, online shopping and emails, without having to worry about the cyber-criminals that currently run free in the virtual wild west that is today's internet.

sleigher's picture

LOL

The best hackers are gen Xers.  I know this is satire but people probably do think this way.  

Rather than NOT hooking your super dooper secret important system to the fucking internet in the first place.

RafterManFMJ's picture

Well, I'm off to enlist folks! I'd rather stop them on the steppes than have these dirty Rooskies snooping through my Quicken accounts or filling our food supply with HFCS.

I just skimmed the FBI docs but I saw not fewer than 3 references to stealing "our precious bodily fluids" so we've no time to waste!

REMEMBER THE HFT RUSSIAN MARKET CRASH! Will be our cry as my contemporaries slouch defiantly into battle.

Greyhat's picture

The Russians are playing chess. If the FBI recorded this, the wanted to have it recorded, officially, for the files.

US defense now has the choice to say "thats all bullshit, paranoia is not espionage" or to say "that is espionage", but then the HFT destabilisation theory is in the files as a true piece of info someone can spy on.

Clever! :)

Syrin's picture

It was the ROOSKIES !!!

 

Better DEAD THAN RED !!!

 

 

logicalman's picture

So, the US governmnent is doing EVERYTHING in its power to damage the Russian economy.

If we are witnessing (if???) a currency war, this kind of stuff is par for the course, whether it's true or fiction.

In Russia they are saying 'it was the Merkans'

It's all bullshit. A small group who have taken power over others play childish (yet deadly) games while the majority pay for all the madness.

 

StychoKiller's picture

I could use a fresh supply of a certain precious bodily fluid, mine is taking a coupla days to replenish, know what I mean?

McMolotov's picture

+1 This one was great. Fight the intolerant cyber-bullies!

Bay of Pigs's picture

He certainly has his moments. Sarc at its best.

TheFourthStooge-ing's picture

MDB, you forgot one important point. It is critically important that each member of this new generation of cyber police is properly accredited.

Greyhat's picture

"We need a new generation of cyber-police, sourced from the best most upstanding technologists of generation X."

You really want to let c# visual studio mouse pushers do mens work? :)

You better call the old mad cowboys if you have some old school optimized job to do.

Ask the NSA to lease you the greybeard that did the duqu ooc com module. This guy could.

lemonobrien's picture

hey dude... i coded the internet at the ip level in the 90s, the only people that use c# are young tards who can't code c. 

 

so fuck you... and the NSA ain'ts gots nofins on mees.

Late onset ADHD's picture

c#.... c#...???...ha, ha, ha!!!...

yeah right, better wipe some of that gui-lube all over their asses... they're about to get "loved long time" against their will...

the only thing more retarded than mdb is the shill that writes his posts and fetches his online-porn for him...

Secret Weapon's picture

Dear Mr. Bonus, How would you gurantee that this "bullet proof regulatory framework" would not be used by the government as a tool for the supression of political dissent? 

Late onset ADHD's picture

MDB is counting on it being used that way...

read between his lines...

MASTER OF UNIVERSE's picture

It took decades to finally get Bernie Madoff, Richard Fuld, Christopher Cox, Angelo Mozillo, Alan Greenspan, Milton Freidman, Robert Rubin, Larry Summers, Henry Paulson, John Paulson, Jon Corzine, et cetera.

Empirically, we have only really been waiting for the Blythe Masters take down for just under seven years time. As soon as Credit Default Swaps

implode the entire World back into the dark ages because of the Dark Pool Derivatives Universe of $1.5 Quadrillion with a 'Q' proportion of volume, we will see a concerted effort to take another look at confining Blythe Masters in a Maximum Security Prison cell just like Bernie Madoff. The 'powers that be' are still making money off of Blythe's Weapons of Mass Destruction and when they stop making money they will think twice about that decision to bring her on-board in 1993.

It is only a matter of time before Masters pays her dues to society

and the Laws of Mathematics!!!

 

What an imbicile Masters turned out to be in just 22 years of her Ponzi run time. Madoff's Ponzi worked for longer than that IMO.

Manthong's picture

Those filthy Rooskies could only pull off this heinous plot if they had a double agent working for them on the inside..

http://www.zerohedge.com/news/2014-12-05/meet-kevin-henry-etf-trading-expert

 

McMolotov's picture

One of the theories that's making the rounds is that the fake nuclear plans were intended to be used as "evidence" against Iran and serve as a pretext for war. If true, the whistleblower likely saved at least a few hundred thousand lives.

HungryPorkChop's picture

@Latina Lover:  Well if they really wanted to steal the REAL economic data, not the BS fed to the masses.

I'd suggest a subscription to John Williams report at Shadowstats.  Its cost is a whopping $175 / year.  http://www.shadowstats.com/

I really hope there's more to this spy story..

TheFourthStooge-ing's picture

Supposedly the FBI also found VHS tapes of Closing Bell and Mad Money.

BorisTheBlade's picture

If anything, the economic data worth a lot is where government admits to certain things, i.e. structural vulnerabilities of the economy and unmassaged statistics not available as open source. That beind said, US economy vulnerabilities are out there in the open and what might baffle Russian intelligence community is why the hell that frauduluent house of cards still standing. The capacity to maintain illusion of prosperity and willingness of masses to follow the lies are truly remarkable. KGB, I'm certain, both impressed and curious.

HungryPorkChop's picture

The part of this story that probably what has the gubbermint on interested is a lot of the stock algo's were supposedly designed by top Russian Physicists back in the 90's after the collapse of the USSR. They needed work and Wall Street was more than happy to hire them in order to design algorithms so they could figure out which stocks to buy and make zillion$$ of dollar$.  Now could that could come back to bit them in the arse..??  I dunno but gives an interesting twist to this spy vs spy story.

me again's picture
me again (not verified) Latina Lover Jan 27, 2015 3:30 PM

Obviously, propaganda. it's pathethic; intended for the 11yr. old population; for those who don't get that; that's the 11 yr. old "adult" population.

popeye's picture

The whole thing is a sick joke. The guy is not even asking for information, hes asking for QUESTIONS!!

Or the second conversation could have a completely different subtext, but the FBI complaint doesn't even contemplate that, so all-in-all the FBI looks like a bunch of ignorant fools with an agenda.

y3maxx's picture

Russian Spy False Flag event.

Yemen False Flag event.

which one leads to open war?

Herd Redirection Committee's picture

Putin is much less of a puppet than Obama.  Come on.

Putin atleast ATTENDS the meetings, LISTENS to the briefings, makes decisions.

Obama spends his time in golf clubhouses (no, I did not mean to say he spends his time golfing).

DetectiveStern's picture

Putin is like someone trading their own money, they don't fuck about. Obama is like someone trading someone elses money, they don't really give a fuck as long as the sucker pays the performance fees.

noben's picture
noben (not verified) Soul Glow Jan 27, 2015 2:49 PM

"Who cares, both are puppets for vast monied interests."

I can't think of a single country where this is not the case, nor one where 'Oligarchs' aren't ultimately in control.

Just like "all people are not the same" and "all parents are not the same", so too all Oligarchs are not the same. I would argue. Like good or bad parents, some are more evolved, capable and decent than others.

The more evolved ones live are in more cultured and civilized countries (Nordic countries, Germany, Austria, Switzerland, Canada, New Zealand, Holland, Luxemburg, Belgium, Liechtenstein, Monaco), where the spread between the top and bottom is not as extreme as in the more rotten versions that apply to most of the world.

It is the worldview of the Oli's in each country that define the character and path of each country.

p.s. I apologize if a more 'differentiated' picture does not align with the B&W preconceived versions that most 'Mericans (and many here) prefer or insist on. "As you were"...

me again's picture
me again (not verified) noben Jan 27, 2015 3:33 PM

The ignorant and intellectually weak surrender immediately;  "their all the same is so much easier than educating yourself; assuming of course, that that were possible.

Volkodav's picture

VV Putin was never about money