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In 1994, in the American firm Citibank, large sums of money

started mysteriously disappearing from clients' accounts.

A resultant investigation revealed that a computer located in Russia

was used to break into the Citibank systems.

The idea of robbing banks from a distance revolutionized the criminal world.

In this series, we will tell you about Russian hackers' very first crimes,

after which the whole world started talking about them.

RUSSIAN HACKERS: BEGINNING

A DOCUMENTARY BY ANDREY LOSHAK

EPISODE ONE THE PIONEERS

NEW YORK, USA

Steven Garfinkel, an FBI agent, was assigned to investigate the case

of the suspicious transactions that took place in Citibank.

Banking fraud was his specialization, but he had never encountered anything

like this before.

There was no computer crime squad in the FBI.

STEVE GARFINKEL FBI SPECIAL AGENT

There was no cyber division. It was a totally different world.

And in many respects, this was an entirely new crime.

It was a…

a cyber bank robbery.

VARNA, BULGARIA

The first penetration into Citibank's systems was by a hacker called ArkanoiD.

In the beginning of the 1990s, he was a member

of an early group in Saint Petersburg who had romanticized hacking;

who hacked security systems out of curiosity,

but not for money.

Back then…

ALEXEY SMIRNOV A.K.A. ARKANOID

…it was purely noncommercial.

It was just a hobby.

Is this why…

ANDREY LOSHAK

…after breaking through Citibank's security,

you didn't try to rob it right away?

Essentially, yes. It was basically a part of our culture.

Doing this for profit was considered something unusual

and contradicted the traditional concepts of hacker ethics.

Even if we don't focus on the related ethical problems,

such as "stealing is bad",

the very idea of theft by technological means in the 1990s in Russia,

was connected to dealing with some very unpleasant people.

And I never wanted to do such a thing at all.

Do you mean that you would have to find a way

to convert the electronic funds to real cash?

Yeah, right. And everything associated with doing this.

Back then, there were two global computer networks in the world:

the Internet and the X.25 protocol, which was used by Citibank.

X.25 access in Russia was provided by an American company called Sprintnet.

To enter the network, you needed to call the number of the provider's local hub

using your modem,

and enter a special command into the terminal dialog box.

Via the Sprintnet connection, ArkanoiD and his friend broke into

Citibank's network and discovered many flaws.

Later on, a detailed guide for using the vulnerabilities found by the hackers

was obtained by Vladimir Levin, an unremarkable computer

and accounting software trader from Saint Petersburg.

One of the members of our group

sold it to him for the ridiculous sum of $100.

He sold it because he thought that Levin wasn't bright enough,

and he didn't expect Levin to resort to methods we wouldn't like.

Why didn't he consider him bright enough?

Levin never was a hacker.

He never explored anything on his own.

He was just a run-of-the-mill trader with a small hardware business.

He showed some moderate interest, but that was all.

Having entered Citibank's cash management system

on his office computer,

Levin randomly selected a few major accountholders

and transferred around $500,000 to the account of his friend in Helsinki.

He managed to convert these funds to real cash.

Levin needed mules: people who helped to turn the hacker-stolen funds into cash.

FORT LAUDERDALE, FLORIDA, USA

In the beginning of the 1990s, Yekaterina got lucky:

she met a prince in a Mercedes named Evgeny.

The couple had a daughter.

However, in the lawless Saint Petersburg of the 1990s,

their happiness ended quickly.

Evgeny amassed debts.

Evgeny started walking around with a gun in his pocket.

Some shady people…

YEKATERINA KOROLKOVA

…started coming to our dacha.

We kept on guard all the time; we were in fear.

He used to say, "We owe this sum of money, we have to give it back."

EVGENY KOROLKOV

Well…

Anyone willing to buy this house?

I can give you a good price.

DEDOVICHI, PSKOV OBLAST

Evgeny Korolkov no longer has an apartment in San Francisco.

The former businessman lives in a village with his grandson.

In the summer of 1994, Korolkov's acquaintance, Vladimir Levin,

contacted him with a confidential request:

to help him convert, or "encash" the money stolen from the Citibank accounts.

Korolkov's wife Yekaterina unexpectedly volunteered for the job.

I had a clear and detailed conversation with my wife.

Like any woman, she said,

"You are a loser. You can do nothing."

I didn't have an opportunity to do that.

I said, "I would be happy to grant you this opportunity."

Take this money.

Take this plane ticket.

Go!

"What do I do?"

I said, "Open accounts in five banks and wait for the money to get there."

Then withdraw it, and you can go wherever you like.

Why did she need so many accounts?

She wanted a million right away.

I told her, "We can send you a trillion if you like.

But how are you going to withdraw it?"

I thought it would be wiser for me to go. He tried to talk me out of this.

But I said that we had no other choice.

We had to pay our debts.

You were aware that you were doing something illegal?

Absolutely!

Absolutely! And I was absolutely sure that I wasn't going to get caught.

"Do you think you can just go and withdraw money,

knowing it's not yours?"

No, I don't think I can.

That's my point.

She thought it would be a piece of cake to come and withdraw money.

That is my point.

Purely psychologically, people don't understand,

"How can this be? I have this money. It was sent to me, but I can't take it."

But you can't.

SAN FRANCISCO, 1994

The money came. A translator and I went to withdraw that money.

When I recall that time, it was such a nightmare.

But it was just me. It was just unforgivable stupidity.

I went in and I said, "Give me $30,000 in cash."

They were looking at me with their eyes wide open,

because at that time, you could buy a house for $30,000.

The bank sees these transfers,

knows they're bad, and they contact the banks to say,

"Hey, these are bad transactions, put a freeze on them."

Katerina Korolkova is in the branch trying to withdraw the money.

They refused to give the money to us.

A security officer approaches us.

He leads us into a room. I was surprised we weren't arrested right away.

I was really surprised.

He talked to us. We explained that we were expecting some money

from my husband.

He let us go.

We left.

On Monday, I was packing suitcases for a flight.

There comes a knock on my door. It's the FBI.

And then they take me to the Federal Prison near San Francisco.

That was my trip to America, to San Francisco in 1994. Yes.

We knew about Levin from Katya. Katya told us about Levin.

The extent of how he was doing it, what he was doing,

we didn't fully, you know, understand yet how he was doing this.

There's another very important component to this story,

which is the cooperation between the FBI and the Russian authorities.

When you look back on this,

you look at, you know, Russian-US relations today

and I don't think this sort of thing could happen.

SAINT PETERSBURG

The FBI asked for help in the Organized Crime Department.

The case was assigned to Investigator Strigalyov.

He found the offenders' address quickly

since a simple telephone modem was used to hack Citibank's system.

It was easy to trace.

We discovered that that number belonged…

BORIS STRIGALYOV, INVESTIGATOR

…to a company in Saint Petersburg.

The company's name was Saturn.

The company's address was 8 Malaya Morskaya Street,

formerly Gogol Street.

Surveillance helped us locate the owner of the company:

Vladimir Levin,

a very advanced computer specialist.

Vladimir Levin was detained quite quickly.

In the fall of 1994, he was careless enough to fly to London on business

where he was detained at the FBI's request.

This footage shot by British television features Levin

surrounded by his lawyers.

Unfortunately, the original footage was lost.

We had to make an inverse translation from English into Russian.

We asked Levin whether he was guilty of this crime.

It is not the time to answer this question,

I would have to answer it in America in front of the Jury.

From the papers that I saw

and accusations that I read I could say that I'm not guilty whatsoever.

If I'm extradited to America of course I may be put on trial,

but all I can say is that I'm not guilty, and this is total rubbish.

While Levin was in a London prison fighting extradition to the USA,

in Saint Petersburg, the investigative team headed by Strigalyov

searched the Saturn offices, where they found computers and weapons.

We get authority to fly to Saint Petersburg.

We meet with the Russian police

and we're in the offices at…

MVD headquarters in Saint Petersburg.

I just had a feeling this was kind of a seminal moment

in the evolution of… you know, of crime.

So, I met with the Russian cops and…

we are going through these materials on the computer and boom,

we find a smoking gun.

There are Citi bank documents

from the cash management system on Levin's computer.

So, this is… this is it, man, we have him dead to rise at this time.

They arrived in a quite short time after the case was opened

the office was searched and all.

Two FBI officers.

We allowed them to copy the digital information

we found on the computer.

We communicated and aligned our efforts.

And they left.

The MVD cops saw we were very excited about this

and it was a cause for a celebration.

It was 11:00 in the morning, the first bottle of vodka comes out.

We finish the bottle, two more bottles come out.

You know, I was a lot younger then and I guess my body can process it but man,

I will tell you I have never in my life…

been as drunk as I was that day.

First of all we started pickles and it's pickle juice and a vodka.

Chocolate bar and the vodka, and then somebody says,

"Oh, very special, very special."

Opens a can of tomatoes.

I can actually understand that. That was almost like a Bloody Mary.

Is "oguschenya" a word?

- What? - Oguschenya.

- Like, snacks. - Yes.

Oguschenya, yeah. Oguschenya.

If you recall, at that time our relationship with the USA was improving.

It was quite favorable.

As a matter of fact,

law enforcement officers always have mutual respect

because, obviously,

there was nothing political about this, it was a purely criminal case.

We clearly had to unite forces.

Steve Garfinkel needed testimony against Levin,

who didn't admit his guilt and fought being extradited.

Evgeny Korolkov was the one to give it.

Garfunkel convinced him to come to America with his daughter

and voluntarily surrender to the authorities.

Why did you go to America after Levin was arrested?

What choice did I have?

Should I have gone to the Soviet prison? To the Russian prison?

I had had a civilized negotiation underway with them.

I took Katya, got a visa in Moscow.

From Moscow, without any rush,

on March 8th,

1995,

I flew to New York City.

- And I was arrested there. - You turned yourself in.

They told me that if I cooperated with the investigators,

they would let me go.

And they would let him go.

On top of that, they would let us stay in the USA.

When they told me that they would let me stay in the USA

and bring my kid here,

it made me really happy.

Who are "they"?

The FBI.

They gave us money.

$4,000.

And they rented an apartment for us.

I always thought Korolkov spoke with us at length.

The central story is that

he was associated with these gangsters

in St. Petersburg.

SAINT PETERSBURG

Korolkov's testimony led to another suspect, Damir Shadaev,

a respected entrepreneur, a timber agent, later a State Duma deputy

from the Leningrad Oblast Legislative Assembly, an LDPR party member.

According to the FBI data, Shadaev helped encash around $4,000

stolen from Citibank.

Shadaev needed money.

He wanted his commission. Levin wasn't giving money away for free.

Nor was I giving away that money for free.

Just try to send someone to encash money for free.

He was to give 50% back.

Then we come to interview Shadayev.

First of all, we heard him coming down the hall,

and he's yakking it up with the cops.

You know, they're all laughing, "ha-ha-ha,"

and apparently, he took his gun and holster off

and gave it to the cops before he came, you know, to see me.

It was kind of clear that whoever Shadayev was friendly with,

he didn't have to worry about, you know, anything from the authorities.

According to the case files, $73,000 stolen from Citibank

was spent on buying weapons in a Finnish hunting store.

Later on, some of that weaponry was found in Shadaev's estate near Vyborg.

They were to confiscate these weapons.

I don't know what they confiscated.

Can you imagine the amount of weapons

you could buy for around $70,000?

He was the first to buy a 17-round Glock.

I was the second to import the second one to Russia.

I had a 19-round one.

We showed off to impress each other.

But Shadaev was the first to wear a Sheik's Cartier watch.

A $60,000 watch.

And he wasn't afraid of wearing it.

In Saint Petersburg, Shadaev is infamous for scaring off journalists.

In 2008, a film crew from Channel 100 tried to go to the island

where Shadaev had built an estate, having unlawfully seized a riverbank.

They had to go back without their cameras.

For some reason, Shadaev wasn't there…

ALEXANDER TROFIMOV, JOURNALIST

…when we came to shoot. He wasn't around.

Suddenly we saw him rushing toward us on his motor dinghy,

all enraged and agitated.

He came up and greeted us.

He grabbed the camera and the stand

that our camera operator didn't guard well enough

and he threw the equipment into the river.

At that time, we felt the merciless 1990s vibe.

Thank God we weren't killed.

The richest deputy in the Leningrad Oblast Legislative Assembly lives

lives on his own island near Vyborg.

Knowing Damir Shadaev's dislike for the press,

nevertheless, we risked going to the gates of his estate.

Hello! Speak!

We would like to talk to Mr. Shadaev.

We can't reach him on the phone.

Whom do I tell him is calling?

Please, tell him that we are journalists from Moscow.

We are making a film about Vladimir Levin's case.

Okay, I'll call Mr. Shadaev now and relate whatever he says to you.

Hello!

Hello, Mr. Shadaev.

Your name is mentioned in Levin's case.

Could you please explain why your name is mentioned there?

DAMIR SHADAEV, BUSINESSMAN

I've never seen or known Levin in my life.

In this case, there was my comrade, Evgeny Korolkov.

He wasn't much of a comrade, though.

He was a man who bought hardware from us.

He bought equipment. We sold goods back then.

He amassed a great debt to us. He fled.

He came back and said, "I'll give everything back to you.

Give me the number of a bank account. I will send you the money." And he did.

"I will be all right."

Then some police officers came to me and said that the money was stolen.

I spent a couple of months in jail.

It was the money from Citibank.

I don't know whether it was only from Citibank or from any other bank.

After two months, they investigated it and said, "We are sorry. You are innocent."

That is how it ended.

Investigator Strigalyov mentioned a weapon consignment

bought in Finnish hunting stores.

I buy weapons in many countries of the world where I have been

because I go hunting.

I have a license for collecting weapons, for using weapons.

For some reason, it became a part of the case files.

Well, yeah. They came here and confiscated all my weapons.

They believed that they were bought with Citibank money.

I have always bought weapons with my own money.

I buy food with my own money.

I buy clothes with my own money.

If they had had any suspicions that these were bought with stolen money,

I think they would have taken it away.

They gave everything back. Of course!

What is this? Did you smell something? A squirrel?

Shadaev blamed Korolkov.

"He owed me.

"He came and said that he could repay the debt.

"I will pay you back by a money transfer."

I think this is partly the truth.

But he was definitely aware that the money was stolen.

THE LDPR PARTY

He went to jail for 30 days and served the rest of the sentence

under travel restrictions.

Then he was in a hospital.

He did all he could to avoid prison.

And later on, at the end of the 1990s,

he participated in a deputy election.

I think he even ran for the governor of Leningrad Oblast or something.

Which also helped him get out of this.

To sweep the case under the carpet?

To stop the prosecution against him.

We didn't have enough evidence.

We know very little about the main player in this story.

He always tried not to draw extra attention to himself.

He says that he got involved in this story by accident.

I don't know.

Even my lawyer said that I don't look like a man who has a lot of money.

Especially ten millions dollars.

Garfinkel managed to convince the British court

that Levin was the main organizer of the Citibank robbery.

He was extradited to the USA, where the young man admitted his guilt

got a three-year sentence and was soon released as he had served

almost the entire sentence during the investigation.

He didn't look like a real criminal mastermind,

but more like a computer geek who…

you know, he found out about this kind of backdoor

into the Citi financial cash management system.

So, he really didn't kind of impress me.

And he certainly wasn't, you know, trying to.

He was just trying to, like, you know, say as little as he could to us

just to get this thing, you know…

I think, you know, get it over with and done with

and then get the hell, you know, out of the US.

You know, as a bad chapter in his…

you know, his life as well.

Vladimir Levin still lives in Saint Petersburg

and runs a hacker-UNrelated tea and beer importing business.

CALLING VLADIMIR LEVIN

- I am listening. - Hello.

Vladimir, hello! Can you hear me well?

I cannot hear you very well.

I will try to increase the volume.

Okay, try now!

My name is Andrey Loshak, and I am the director

of a film about the phenomenon of Russian hackers.

Where did you get my number?

We also know how to work with databases.

To be honest, I am not interested at all.

It is all old, boring, uninteresting stuff.

I think a dead fifteen minutes of your film will be useless.

It all happened too long ago. It is boring, uninteresting.

Not interesting at all. That's what I think.

It is like discussing a horse carriage

in the times when we have Teslas on our streets.

Nonsense! It can't be interesting to anyone.

Come on, come on.

Oh, little Tyoma…

The Citibank robbery had a major influence on Yekaterina and Evgeny Korolkov's fates.

After serving his time and after his divorce, Korolkov returned to Russia

without money or home.

He lives in poor conditions with his grandson

while his daughter is trying to make it in Saint Petersburg.

Yekaterina stayed in the USA, remarried, and divorced again.

Over the last five years, she has been living with her biker boyfriend

and working as a surfing instructor.

Due to a bureaucratic mess-up, she has lived here without documents

for all these years.

Her daughter, who grew up in America, went to see her father 14 years ago.

Ever since then, she hasn't been able to return

to the country she considers her homeland.

You have never seen your grandson?

Only on my phone.

Right.

Steve Garfinkel invested lots of effort in helping Yekaterina acquire citizenship.

But the FBI agent couldn't fight through the Immigration Service's bureaucracy.

I think she's a good person, I think she…

kind of learned from her past mistakes.

I've always seen her as being very kind of upbeat.

I follow her on Instagram and Facebook.

She's always got kind of uplifting stuff, she's…

You know, about, like, kite surfing.

Investigator Strigalyov and his colleague went to the USA for a reciprocal visit

at the end of the 1990s.

It wasn't very useful for the case.

But the trip was something to remember.

This is me, and this is…

Alexander Polyakov.

This is how I looked when I was on my trip to New York.

This is our hotel.

I feel very grateful to our American partners

for arranging very good accommodations for us.

I had my own room.

Two rooms.

The FBI paid for their trip

because they're going to be doing an investigation here

to help on their end.

Like, I went there and, you know, they helped me.

They're going to come here and I'm going to help them.

We had a party one night in their room.

'Cause it was a really nice room.

It was the same, you know, thing with bottles of vodka

and they brought a special… Basically, it's fat, pork…

You know, pork fat with, you know, raw onions and…

- Salo. - Salo, yeah, right.

Which is a little, you know…

different for, you know, Americans and…

But we had… we had a really good time.

The Citibank system being broken into by a Russian hacker

helped the FBI get a budget for creating special cyber squads,

and later on, a special cyber division with 56 offices throughout the country.

Levin's case was unique for many reasons.

It was the first network bank robbery,

the first international crime perpetrated by Russian hackers,

and the only instance of such close cooperation

between the law enforcement agencies of Russia and the USA

in the cybercrime area.

CHELYABINSK

Hallelujah!

Oh! The Washington Post, with a column about me!

A real column about me!

Internet Dreams Turned to Crime.

The dreams of the internet have led to crimes, I guess.

And there should be a big article.

I read this in Arizona.

Russian hackers hit the headlines in America again in 2000.

A programmer from Chelyabinsk, Vasily Gorshkov

decided to cash in on the dot.com boom and founded a company called TekhNet.Ru.

Its business was creating websites.

He found jobs abroad and did them in Chelyabinsk.

A monthly profit of $100 was considered good back at that time.

We have smart guys who can write this code.

VASILY GORSHKOV

And these guys didn't even necessarily have to be very smart

because I enjoyed doing an occasional job myself.

PHP and all. I was studying these languages.

It didn't seem difficult. It still isn't.

It is very easy to learn something, to write a script and execute it.

TekhNet. Ru employed a 20-year-old computer genius

named Alexey Ivanov.

He became Gorshkov's right-hand man very quickly.

Apart from developing websites, Ivanov found vulnerabilities

in American companies' networks

and asked $1,500 to eliminate them.

Here is a part of the correspondence of Ivanov with an administrator

of the Speakeasy Provider from Seattle he hacked.

I am checking security at Speakeasy and found some holes.

Would you like to hear more about them?

And now, I'm looking for a job.

Can you talk with your boss about giving me a job?

I am not sure you would want a job here. We are pretty poor.

I do have friends in larger companies, however.

Microsoft, of course. Amazon.

Amazon, hehe? Cool company.

I stole a lot of CDs, DVDs, and books from Amazon.

I don't have any other way to make money.

Ivanov dreamt of being a cybersecurity professional.

It was impossible to find such a job in Russia back then.

Ivanov often complemented his hacks with a CV and a request to hire him.

That was what gave the Chelyabinsk hackers away.

SEATTLE, USA

When Ivanov stole the data for 6,000 users of a popular Seattle internet provider,

the American Special Services started devising a plan

to catch the Chelyabinsk hacker.

Prosecutor Steven Schroeder was involved in the case.

Computer crimes were his specialization.

Since Russia didn't respond to inquiries about the hacker,

they decided on the "lure" option.

STEVEN SCHROEDER

There is an undercover procedure known as the lure,

which was a technique to trick criminals in other countries

to come to the United States or some other country

where they could be then arrested or arrested and extradited.

The FBI in Seattle set up a fictitious Internet security company,

which they called Invita.

Ivanov had been advertised himself to his victims

as a computer security expert and trying to get employment.

So he was pretty easy to lure.

We began to negotiate with him and then he said,

"By the way, I want to bring my partner Gorshkov with me."

Now, that was the first we'd ever heard of Gorshkov.

Alexey Ivanov was a talented guy who lived in Chelyabinsk.

He barely made a living, doing occasional jobs.

Well, browsing the internet was just his hobby.

Since he had no money to pay for the services

he might have examined the code, found holes,

and offered to eliminate it for a certain sum.

He approached me with a proposition, "Let's go there

and establish a joint company."

After this, we started creating that joint venture company

in the area of cyber security.

So, you took that bait.

You journalists might see it that way.

As for me, I had a good time.

And I have a story to tell. Twenty years later, you are still interested.

Look!

At those windows. Not at the top. The fifth floor, I guess.

That used to be our office.

TekhNet. Ru was there, right?

Yeah. We had our servers there.

Real servers, real workstations.

The most famous photos of me and Ivanov…

The guys told us to send them photos to be able to recognize us.

We found the corner of our office that looked the shabbiest.

It was near the bathroom door.

The door frames were all cracked, and we took photos against them.

You took these pictures for the Americans?

- Yeah. - Why did you choose the shabbiest corner?

The Americans thought that we were poor and miserable.

And we wanted to show them that.

Hey, guys!

A cyber security expert named Raymond Pompon

was involved in the special operation

for fishing technical details out of the Russian hackers.

For that, he was to impersonate an Invita employee

in an office that was rented for this occasion.

It was, like, a big deal for the FBI at the time.

RAYMOND POMPON

They actually had a helicopter flying over Seattle

watching the car leaving the airport.

A lot of money was spent on this because this was going to be the FBI's big bust,

and they were really going to send a message to the world

that, like, the FBI can get you no matter where you are.

TekhNet. Ru is a play on words in Russian.

It means, "I'm not rubbing those things. But I'm rubbing these things."

Got it?

We are not rubbing those. We are rubbing these.

I'm not rubbing those ones. I'm rubbing other ones.

It's a joke.

It's a play of words.

The special operation was secretly filmed.

The footage was to be a part of the evidence

that was to demonstrate the Chelyabinsk hackers' guilt in court.

And then I remember they showed up.

And the first thing that surprised me was how young they were.

Although, I had told the agents, "You know what you're going to see?

You're going to see one technical guy and one business guy."

That's kind of how in the tech world we do it.

When you send somebody to a customer,

you always have, like, the nerd and then the guy who seals the deal.

And that was kind of the role.

Alexey was the technical guy, and Vasiliy was, like, the one making the deal.

CHELYABINSK AIRPORT

On Thursday, we left Chelyabinsk.

We arrived in Seattle on Saturday.

We didn't sleep for a minute.

We saw that Seattle did exist.

Right after they met us in the airport, I had a feeling that they were shady guys.

I didn't think we would work with them.

They asked us where to buy bogus money.

Things like that.

And I was exhausted and didn't feel well.

We arrived.

"We would like to go to a hotel. Should we book our rooms ourselves?"

"Don't worry, we booked rooms for you. But first, let's go to the office."

"What office? We haven't slept since Thursday."

"No, let's go to the office!"

We went there. There was a room.

- So they didn't even let your sleep? - Bastards!

But when I started talking to them,

I realized that they were just geeks like me.

We weren't that much different,

except for they seemed to have, like, no respect for the rules at all,

but I realized that that might've been culturally dependent, too.

Because I had grown up in a place where there was a lot of rules,

and they grew up in a place where probably rules were…

meant to be broken in order to survive.

I can't call myself a hacker.

I'm no hacker.

No, it's not hacking, actually.

But a sort of business.

Right after we came there, I went to check my e-mail on my server.

The server was physically standing in the Chelyabinsk office.

I logged in. I had a look.

They were like, "Show us how you hack. Show us how you do this and that."

We were like, "What are you talking about?"

They say, "Show us how you hack."

I was trying to do the opposite: to show them our flash.

Flash was trendy at that time.

They were like, "Yes, that is pretty. But show us how you hack."

We had a laptop set up with a keyboard logger on it.

They said, well, let us show you.

We can't do any hacking here because, you know,

this is America and we're worried about the FBI.

To which everyone in the room is like…

But what they did is they logged into their server back in Russia

and pulled down some tools,

to me they weren't actually very sophisticated tools.

Later on it turned out because they had done that they'd actually…

we'd captured their password

that they used to log in to their site to bring their thing down,

which became a big issue in the case later on.

Later on, when they started going on and on about bogus money,

I was like, "Okay…

"Guys, you seem to have read too much about the Russian mafia.

"You have the wrong idea.

"We are just IT guys."

Even though nobody called us IT guys, just computer guys.

Right after we left that room,

we go down to the parking lot, and it is all full of police.

All the Washington State Police, and some came from California.

Gorshkov and Ivanov were immediately separated and sent to different jails.

They never saw each other again.

Accessing his server on an FBI computer was Gorshkov's fatal mistake.

Before that, the FBI only had the proof of Ivanov's guilt.

They accessed this computer that physically was here, in Chelyabinsk,

in the Russian Federation,

and started copying files as fast as they could

without understanding what they were.

After that, they went to a judge to ask for a warrant

to search the computers located in Russia.

But they couldn't obtain this warrant.

It is in Russia, which is in a different jurisdiction.

Basically, they committed a crime in Russia.

And a criminal case file was started in Russia.

About premeditated damage to property and unauthorized access.

They opened their own case in Russia against American government

for accessing Gorshkov's data without his permission.

- Have you heard about it? - I've heard about it, yes. Yeah.

I have a copy of a headline on a Moscow newspaper.

What do you think about it?

Well, I think I won't go on vacation to Russia.

In our file dumpster, they found heaps of scripts that open someone's e-mail

or close someone else's e-mail.

Several catalogs with titles like "F…ck eBay."

I don't remember if there was "F…ck PayPal."

Elon Musk was respected even back then,

so "F…ck PayPal" might not have been there.

What matters is, there were files with such names.

I think that's why I lost my case.

When the jury saw that "F…ck," they didn't even want to look further.

And they even couldn't understand what these scripts did.

Data found on Gorshkov's server enabled the prosecutor

to lay a new accusation against the hackers.

What they were doing they were scanning IP addresses

looking for certain port numbers.

Port numbers identified processes or applications that were running,

and there were some known vulnerabilities in several of them

and they simply exploited them.

PayPal was not hacked

but what they did was they used

some web-based e-mail companies to establish e-mail accounts.

They would then associate those accounts with stolen credit card numbers

and open PayPal accounts with that information.

They would then purchase goods

either through eBay or other online merchants,

and pay for them through PayPal using the stolen credit cards.

Those goods were then shipped to Kazakhstan.

They had actually built a very elaborate system

of making use of eBay and PayPal

to launder credit cards and buy things online.

In some ways I think they were pioneers in the field.

Oftentimes when you're following cybercrime, it's like follow the money.

Follow how they're making the money

'cause that's where you'll see the innovation.

It's like Bitcoin sort of drove ransomware and things like that.

So, these guys, they were early to figure that out

and early to really capitalize on that, so…

Unlike Ivanov, Gorshkov refused to admit guilt and cooperate

with the investigators.

He faced from 25 to 100 years in prison: this impressive term

was based on the damage estimated by the investigators as being $25,000,000:

$500 per stolen card with 50,000 cards in total.

The defense expert, however, proved that the investigators

mistook any 16-digit sequences found by the FBI agents

on the server in Chelyabinsk for card numbers.

We go to the courtroom.

Ivanov isn't there.

They state the damage. Twenty-five million.

I can feel my prison reputation getting a boost. Because it's so…

There comes my expert who, as I was thinking,

was working not for me but for the government,

and he says, "Hang on, why did you decide that these are credit cards?"

At that moment, I got that he was really working for me.

And the judge goes, "Do you have any more evidence?"

And that was it. They immediately wrote off that twenty-five million.

As a result, instead of twenty-five years,

Gorshkov was sentenced to three years, after which he was deported to Russia.

Prosecutor Schroeder was disappointed.

We were disappointed in the sentence.

We thought it was low.

Judge Coughenour was an interesting man.

He's a federal judge, and he had

worked in an international organization with Russia

in developing or looking at the judicial system in Russia.

So, he was fond of Russians,

and he had a lot of sympathy for these young people

who really didn't have a lot of opportunity,

where, you know, buying a used car was a luxury.

He had a lot of sympathy with that, and he…

He gave Gorshkov what we thought was a lenient sentence.

This was during the first big web boom out before the burst,

and there was all these companies were just exploding.

Technical skills were super valuable.

There were bidding wars for people with talent.

And, so, to be somewhere, like, in Chelyabinsk

and see that and not have that…

You know, that could definitely sort of cloud your mind and go, like,

"Wow, I want a part of that. How can I become part of that?

Why not me? I may know more than these guys." So…

That's what I saw from them and I actually felt bad.

I can understand. You want to do this.

I like to build, I like to do these things, and it's…

You can't and so here's a way to do it.

And it's unfortunate this what it ended up.

Having returned to Chelyabinsk, Gorshkov tried various professions.

In 2010, he decided to run for the local legislative assembly.

For that, he founded the Townspeople Social Movement.

This is the focus of attention for the deputy candidate

Vasily Gorshkov.

Making the residential areas more comfortable and green.

Controlling the quality of utility services.

Supporting mothers and children.

YEKATERINA TOMILOVA, A MOM-TO-BE

Gorshkov focuses on mothers' issues.

The issues of single parents, big and poor families.

We are voting for Vasily Gorshkov.

Mine is the politics of real actions.

For Gorshkov!

For the townspeople!

As expected, Gorshkov lost the election to the United Russia candidate.

Other attempts to cooperate with the government

weren't successful either.

That is what I don't like about our officials and deputies.

I have never hidden my story. I am not proud of it.

I'm not hiding it because I believe that I got there by accident.

I really did.

But any time I get in contact with any state entity,

they say, "Oh, this will come to no good. Let us think about it," and so on.

Is this like a brand you can't remove?

Yes.

It never goes away.

I think it is double hypocrisy.

The very same people might be saying, "Yeah, you did great in that story.

You fought back against the Americans."

In the next sentence, "Hold on, how can we do that?"

Well, you can't.

All that was left from the prison epic is this box with documents

that Gorshkov managed to take from the USA

and now keeps in his garage.

These are the trial transcriptions.

Here is Gorshkov, the defendant.

Washington. And so on…

Steve Schroeder, Floyd Short.

That's it.

Robert Apgood. He is a good guy.

He was the computer expert.

I have kept all the papers. I have to arrange them neatly

and then burn them neatly because after twenty years, if nobody requests them,

you won't be reading them either, guys.

Please, make sure to thank that expert who did the great job of figuring it all out.

I thought that that expert was against me.

But he eventually showed that I didn't have the twenty-five million,

as if I had stolen twenty-five million, I would be sentenced to twenty years.

Quite to the contrary, he sent money to my family here

because they were in hardship.

He participated in a multi-million dollar trial, yet he helped,

he sent them some decent money during that time.

I can't find the proof now, but they really lived off that.

- Did you ask him? - I didn't even know about it.

I've never even talked to him.

If he, Rob Apgood, hears this, I will be sincerely grateful.

He transformed the way I saw people, Americans included

because when I was on trial,

naturally, I was very angry.

But then I looked at them and thought, "They're all just people."

This is gifts.

- Yeah, it's very nice. - Black caviar and vodka.

- Yes, very nice. - Typical Russian present.

- Yes, very nice. - It's for Vasiliy Gorshkov.

Vasya was looking at about 25 to 100 years of imprisonment.

ROBERT APGOOD CYBER SECURITY EXPERT

We did an excellent job as the legal team,

we got it down to three years with credit for time served.

And he'd already spent 22 months then.

He always struck me as a very forthright person.

I presented some fairly damning evidence to him,

and he admitted that he knew about it, and I thought,

“I got an honest client. That's rare.”

I knew he had a newborn child, a daughter, I believe.

I spoke to his brother and he said,

“Well, she's having difficulty because she needs medicine for the baby and whatnot

and they couldn't afford it.” So…

I sent money over to them to take care of the child.

- Your own money? - Yes.

- Do you remember how much? - No.

Doesn't matter.

Did you do these things often with your clients?

Never before, never since, no.

- Just once with Gorshkov? - Yes.

Unbelievable.

I don't think children should suffer

because of wrong doings of their parents.

I have a…

strong belief in God.

I'm an ordained minister as well and have been since 1969.

So, I look at people from the perspective of

what would a good person do if God expected them to take action.

And… that's what motivated me.

Gorshkov owes the US Government over $60,000.

That is the estimated damage for things bought

under forged accounts and sold in Russia.

A businessman from the Urals, Andrey Tkachenko,

was among the people who purchased the goods, no extra questions asked.

We were working with them a lot.

They sold us disks a little cheaper than the licensed sellers.

But they were still authentic?

Yes. It was evident that they were from America with all the labels.

And American disks are very different from European ones, for instance.

It was evident that they came from America.

I think he also bought phones on the internet.

Because we had started dealing in phones by then,

and he also brought us phones.

- For money? - Yeah. Why not?

Motorola was considered a good brand back then.

Did you convert, or "encash", money from PayPal?

We did encash some money.

But the sum wasn't anything like twenty million.

I, personally, don't care about those Americans who became his victims.

He stole there and made investments here.

Now, it's the reverse. They steal here and invest there.

Of course, there is a difference.

If Vasily hadn't gone there,

he would have got a million cards.

He would have handed each Russian an American card.

"Here! Take it!" It would have been great.

Prosecutor Steve Schroeder, after retiring,

wrote a book on the Chelyabinsk hacker case, called The Lure.

You know, this case was a huge deal

for the computer security profession.

- Why? - Well, because…

The bad guys got caught, which they often don't,

especially when they're coming from a foreign country.

And it just turned out well for them.

This was the first large hacking case that actually went to trial.

What that meant was that all the evidence was public,

and could be put in a book.

Steve Schroeder, he wrote a book about this case.

He didn't say nice things about me but that's okay.

They presented a good case.

They were dispassionate, they were doing their jobs,

and they did it fairly well.

We just did ours better.

That was the point of the case.

To show… Like, we could stop, you know, people in Russia

from hacking by capturing them and arresting them.

So, it was really meant to be a big statement by the FBI

and they put a lot of thought behind this.

It failed because the case went to prosecution in September 2001.

You know, soon after that the FBI sort of shifted priorities to terrorism.

Gorshkov's associate Alexey Ivanov, after serving his sentence,

stayed in the USA, which is surprising since they usually deport Russian hackers

with a permanent ban.

We don't know whether he works for the American company he dreamed of

or for special services.

We couldn't reach Ivanov.

After we contacted him on LinkedIn, he deleted his account.

I get that he made a deal.

He must have been a valuable expert for their special services

once he stayed there.

I don't know. And nobody told me why they didn't let me talk to him.

Why haven't you talked to him since then?

I can't say that I was angry at him or felt irritation.

Of course, I didn't like some things.

But on a bigger scale, we just got unlucky.

It could have happened to anyone.

Gorshkov and Ivanov's case was the FBI's first large investigation

against Russian hackers in the twenty-first century

despite damages that seem ridiculously small in our times.

The Americans thought that a show-trial would stop a growing wave

of cybercrime from post-Soviet countries.

As we know well now, their hopes weren't destined to be fulfilled.