Wednesday 28 January 2015

Washington's spy scandal

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

27 January, 2015

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:
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.

Hands up anyone who believes Jen Psaki.

US State Department, Russian Officials Hold No Talks on 
Spy Scandal
US State Department spokesperson Jen Psaki said Tuesday that no discussion had been held between the State Department officials and the officials in Russia in the past 24 hours regarding the arrest of Russian citizen Evgeny Buryakov.

27 January, 2015

WASHINGTON, January 27 (Sputnik) — US State Department officials had no discussions with their Russian counterparts, regarding the arrest of Russian citizen Evgeny Buryakov on suspicion of conspiracy to act as an unregistered agent of a foreign government, the Department’s spokesperson told journalists on Tuesday.

Not that I am aware of, no,” Jen Psaki said when asked if there has been any discussion between the State Department officials and the officials in Russia in the past 24 hours, stressing that they have been in contact with the Department of Justice.

On Monday, federal prosecutors in New York charged Buryakov, Igor Sporyshev and Victor Podobny on suspicion of acting as unregistered agents of a foreign government. On the same day, Buryakov was placed under arrest and appeared before US Magistrate Judge in Manhattan federal court.

Sporyshev and Podobnyy no longer reside in the United States — they had left the country before criminal charges were brought against them.
While they were here, they both had immunity and cannot be arrested,” Psaki noted. “Typically, when individuals are no longer here, it’s no longer applicable.”

What I can confirm for in this case is that a request for a waiver of immunity was not a factor,” the spokesperson concluded.

According to the US Department of Justice, Sporyshev said he was a Russian trade representative, while Podobny said he served as an attache to Moscow’s mission to the United Nations.

On Tuesday, Russia’s Vnesheconombank confirmed that Buryakov served as a deputy representative of the bank in New York.
The next hearing on the case is scheduled for February 9. Buryakov who is facing up to 15 years in prison, but said he would not plead guilty.

The Russian consulate general in New York said Tuesday that Russian diplomats will visit Buryakov on Wednesday.

Spokesman for the Russian Foreign Ministry Alexander Lukashevich said Tuesday that the United States has not provided any evidence to support the charges against three Russian nationals, and that US authorities have used the favored tactic of creating spy scandals, although the relations between the two countries are already tense.

Moscow on ‘spy scandal’: No grounds for arrest, US stoking ‘anti-Russian feelings’

Court sketch of Evgeny Buryakov (Reuters / Jane Rosenberg)

27 January, 2015

Russia’s Foreign Ministry has demanded the immediate release of Evgeny Buryakov, the Russian bank employee arrested for espionage in New York on Monday, and says the accusations against him and two of his fellow countrymen are “groundless.”

We are getting the impression that the US is resorting to its favored tactic of creating a spy scandal. Relations between Russia and a hostile Washington have long been suffering a difficult period. Obviously thinking, the worse it is, the better, the US has launched another wave in its anti-Russian campaign,”Foreign Ministry spokesman Aleksandr Lukashevich said in Moscow.

39-year-old Buryakov, who worked for the New York office of Russia’s Vnesheconombank (VEB), faces up to five years in jail for his part in “a conspiracy to act in the United States as an agency of a foreign government without first notifying the Attorney General.”

We demand a halt to the string of provocations against Russian officials, orchestrated by the US secret services. We also request immediate consular access to Buryakov, as well as meticulous respect for his rights as a Russian citizen, and his release,” Lukashevich said.

Working outside any official diplomatic capacity – under “non-official cover” – Buryakov was labeled an “extremely valuable intelligence asset” in FBI statements released this week, following an investigation that reportedly began back in 2010.

The two officials who allegedly assisted him were Igor Sporyshev, a government trade representative, and Victor Podobnyy, who served as one of Russia’s attaches to the UN. Both face charges of up to 10 years, but have diplomatic immunity and have left the country anyway.
No evidence has been presented that would back up these accusations,” Lukashevich said.

View image on Twitter
FBI Buryakov investigation involved not just wiretaps, but CIs, physical surveillance, hidden cameras & hidden mics.

FBI documents detail allegedly tapped conversations between the three. In one, Podobnyy and Sporyshev supposedly complain that their lifestyle does not match up to depictions of James Bond. In another, they reportedly discuss best strategies for recruiting college students to work for the SVR, Russia’s foreign intelligence service.

View image on Twitter
One of the agents in alleged Russian spy ring expressed surprise that the work wasn’t like a James Bond movie

In 2014, FBI also set up a meeting with a fake investor interested in opening a casino in Russia. During the interview with Buryakov, he "demonstrated his strong desire to obtain information about subjects far outside the scope of his work as a bank employee."

Buryakov’s lawyer has sought bail for him, while the other two men, presumably currently in Russia, have not commented on the charges.

The last comparable operation against purported Russian spies in the US took place in 2010, in which Anna Chapman and nine other “sleeper agents” were fingered by the FBI. Coincidentally, the records of the latest bust show that Sporyshev commented that the expelled agents from 2010 “weren’t doing s**t”at the time of their arrests.

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