A federal judge in Brooklyn, N.Y., has ordered that Vitaly Korchevsky, a former Morgan Stanley vice president arrested for allegedly trading on confidential corporate information stolen by hackers in Ukraine, be released on $2 million bond.

Mr. Korchevsky, 50 years old, also will be required to pay a $200,000 cash deposit, surrender his and his family's passports, wear an ankle bracelet for location monitoring and restrict his movements to certain parts of Pennsylvania and New York.

Prosecutors had pressed for the judge to keep Mr. Korchevsky detained in federal custody. They alleged that Mr. Korchevsky was one of the biggest beneficiaries of an elaborate scheme in which overseas hackers stole nonpublic corporate information stored in newswires' systems and gave it to financial traders, who used the press releases to make lucrative bets.

Mr. Korchevsky alone made more than $17 million in profits from the insider-trading scheme, prosecutors allege, and $10 million of that already has been frozen by the government. Mr. Korchevsky has pleaded not guilty to the charges, which include securities fraud and money-laundering conspiracy.

Officials have said the case, which is being handled by prosecutors in Brooklyn and New Jersey as well as the Securities and Exchange Commission, is the largest known collaboration between traders using insider information and hackers.

In deciding to release Mr. Korchevsky, U.S. District Judge Raymond Dearie appeared to be influenced by his close community and religious ties.

Mr. Korchevsky has been a Baptist pastor for decades, and dozens of his friends, family and congregants came to support him at Wednesday's hearing—an estimated 80 to 90 people, according to Mr. Korchevsky's lawyer Steven Brill. So many people packed into the Brooklyn federal courthouse that an overflow room had to be set up, which is unusual for a routine bail hearing. Some showed up from as far away as Spokane, Wash., Mr. Brill said.

Judge Dearie said the level of support for Mr. Korchevsky was "somewhat unprecedented."

"If you don't play ball, you're going to disappoint a lot of people," Judge Dearie said to Mr. Korchevsky, citing "the faith that hundreds of people have placed in him."

Mr. Korchevsky is one of five defendants arrested in the U.S. for the alleged scheme. Criminal charges also have been filed against four others who are still at large in Ukraine. International warrants have been issued for their arrest.

Mr. Korchevsky is a former vice president at Morgan Stanley who later ran a hedge fund. At the time of his arrest, he was living in Glen Mills, Pa., a suburb of Philadelphia, with his wife and two children, who were present at the bail hearing. He was born in the former Soviet Union but later became a naturalized U.S. citizen.

Two defendants in this case, Alexander Garkusha and Leonid Momotok, also are expected to appear for bail hearings soon in Brooklyn. A federal magistrate judge in Gainesville, Ga., had released Mr. Garkusha on $75,000 bond and Mr. Momotok on $150,000 bond, but those decisions have been put on hold pending their bail hearings in Brooklyn.

Suzanne Hashimi, Mr. Momotok's lawyer, said she believed the government's request to detain him was "unreasonable" and was "pleased" the magistrate judge agreed with her.

Jerome Froelich, Mr. Garkusha's lawyer, said his client is entitled to a bond, saying he played "a minimal role at best" in the scheme, based on his reading of the indictment.

Prosecutions of two other defendants, father and son Arkadiy and Igor Dubovoy, will be handled by the U.S. Attorney's office in New Jersey. A federal magistrate judge in Atlanta has set a $3 million bond for Igor Dubovoy's release, although he hasn't yet been able to satisfy the bond. Arkadiy Dubovoy was ordered to remain in federal custody.

Bruce Morris, Igor Dubovoy's lawyer, declined to comment. A lawyer for Arkadiy Dubovoy didn't immediately respond to a request for comment.

Write to Nicole Hong at nicole.hong@wsj.com

Subscribe to WSJ: http://online.wsj.com?mod=djnwires

(END) Dow Jones Newswires

August 26, 2015 14:05 ET (18:05 GMT)

Copyright (c) 2015 Dow Jones & Company, Inc.
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