Why Ukrainian tech companies face raids by masked police

Over the past few weeks, Ukraine has been mentioned hundreds of times in many global news publications because of huge protests against the current government that broke out in Kiev, the capital, and other cities. The protest movement, so-called EuroMaidan, has united people who are not satisfied with the current way of things, and attracted media from all over the world to the easternmost country in Europe.

What got less coverage over the course of the past two to three years is one of the reasons why there are quite a bunch of people from Ukrainian IT companies among today’s protesters. For sub-industries like e-commerce and offshore software development, the last few years have seen a new phenomenon emerge – the “maski-show” (Russian for “masks show”). This is when special police forces — usually wearing black masks, — break into offices, seizing everything from servers to flash drives and effectively paralyzing the work of a company for weeks or even months.

Dark masks, dark words

Andrey Horsev’s own apartment and the headquarters of 908.vc, co-founded by him in Dnepropetrovsk, were ransacked by local police in November 2013, just a few weeks after a major disagreement Horsev had with his former business partners over their jointly owned website Klumba.ua.

“I don’t know the [real] reason [for the search operation],” Horsev said. “The official reason was that there was porn found on our website, which is particularly strange given that it’s a community of young parents.

“At the moment, we have not been indicted on any charges. Meanwhile, a group of people with a forged seal and sham papers has changed the list of founding members at Klumba.ua and took the domain name.”

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Named after a TV show popular ten years ago, “maski-show” has happened to more than a dozen notable tech companies in Ukraine over the last couple of years. However, despite looking pretty similar to each other, the occurrences may not be a part of an evil plan to put pressure on the local IT business.

“All and any ‘maski-show’ in Ukraine are not centrally coordinated. They are mostly initiated by local police, less often by competitors; in very rare cases they are part of really feasible prosecutorial activities,” said Dmytro Gadomsky, an attorney-at-law in Juscutum, Ukrainian attorneys association that specializes in legal cases involving tech companies.

The sporadic nature of the raids means that there’s a dangerous trend forming on the modern Ukrainian tech business scene that assures both business people and those on various government positions that their problems can be solved by “maski-show” pretty easily.

To flee or not to flee?

Among the cases of using police forces to put pressure on tech companies is the relatively well-known story of ProstoPrint.com where the confrontation between the business and police had a political subtext. In summer 2011, the print-on-demand company fulfilled an order of t-shirts with a print criticizing the country’s president Viktor Yanukovich, which presumably led to its office being ransacked. Subsequently ProstoPrint was accused of copyright violation.

For Denis Oleynikov, ProstoPrint’s owner at that time, the story didn’t end very well, as he ended up leaving Ukraine because of concerns regarding the safety of his family and himself. At the end of 2012, Oleynikov received political asylum in Croatia and eventually sold his Ukrainian business.

For Horsev, however, it’s not an option yet. “I can’t leave Ukraine, because during the search operation police seized me and my partner’s international passports. I don’t know where are they now,” Horsev said, adding that he thinks that “currently there’s a threat to my physical safety.”

From baby to adult

908.vc is the first company working in the relatively young Ukrainian VC and startup sector to face “maski-show” on its doorstep, while more traditional players in the tech market have been facing similar problems for a few years by now. Among them is Rozetka.ua, the biggest local e-retailer specializing in electronics. In 2012, following “maski-show” in its offices and seizure of its servers from a local hosting provider, the company was accused of tax evasion and ended up paying about $1 million in fines.

“The state doesn’t wait for court decisions, it just beats, frisks, arrests you,” said Vladyslav Chechotkin, Rozetka’s founder and CEO. “In the course of that standoff we won 11 court cases, but every time there was another one coming next… If the state wants something from you, you have only one option — to give it up.”

Like Oleynikov and Horsev, Chechotkin had thoughts about moving abroad, which he expressed on his Facebook account. However, he is still based in Ukraine.

“I’ve been building [Rozetka.ua] for almost 10 years,” he said in a phone interview. “It’s very difficult, if not impossible, to create something similar again, especially in another country. Of course, if the situation changed for the worse, I would have quit and left. But for now the issue is solved, so we’re living here.”

The only part of Rozetka that has migrated abroad is the e-retailer’s servers, which now are hosted in Germany. The website’s frontend is still hosted in Ukraine to make it faster for local customers, but if the local hosting provider was forced to give up Rozetka’s servers again, it would only lead to a “short break in service until new DNS records are applied,“ said Chechotkin.

Among other major tech companies that survived local police’s attention in the form of “maski show” is an e-payment service WebMoney, which local media assume to have crossed the path of another similar company unofficially backed by people close to Ukraine’s government agencies. The full list of victims is pretty long, and it would take another thousand words to briefly describe their tribulations. To name a few, there are offshore software developers Zfort, GlobalLogic, Art-Master, and CamoIT, as well as major online retailers Fotos.ua and Deshevshe.net.ua.

What’s also worth mentioning is an exemplary story that happened recently with VK.com, the most popular social network in Ukraine and Russia with more than 50 million daily users. In June 2013, Ukrainian police seized VK’s servers, which were hosted in Kiev in order to speed up the social network for local users. The official reasons were very familiar to everyone who watches the tech news in the country: first, the police assumed that the servers contained data on tax evasion of an unknown Ukrainian company, but in a month they changed their mind and claimed they had found images of the sexual abuse of children on the seized disks.

Six months later, VK.com co-founder and CEO Pavel Durov wrote on his page on the social network that to return the hardware, which cost about $500,000 in total, Ukrainian officials wanted a generous ransom of $100,000.

We need to go deeper

When talking about the reasons of troubling occurrences of “maski-show,” Rozetka’s Chechotkin argues that it’s just the IT industry’s turn to be taken under unofficial governmental control.

“It’s that simple. First they took ironworks, then supermarkets… You know what I’m talking about,” he said.

It is not a common opinion though. Roman Khmil, a software development industry’s veteran whose former company GlobalLogic was “checked” by the police twice in two years, is convinced there’s no conspiracy behind the raids.

“What happens is usually cases of ‘domestic violence’ and local government bodies exceeding their authority. In one case, business partners couldn’t agree and involved police, in another a company put a hit out on a rival, or one employee of a company did something unlawful, or a local authority just wanted a bribe. This is not the government’s course.”

But even if what Khmil assumes is true, it still does not seem right that the police and other power structures have become a tool in anyone’s hands to solve their business problems. And there’s a deeper lying reason why things go this way, says Vladyslav Chechotkin, and it’s irresponibleness at all levels.

“If a tax policeman, or a judge, or a prosecutor make an unlawful decision, who will be responsible? No one. You can assume anything, accuse people of anything, do whatever you want — and you won’t be held responsible. And it’s not only about police; President, Prime Minister — they won’t be responsible for anything either,” he said.

Inevitably, towards the end of the interview with Chechotkin we came to the topic of politics, which is very hot in Ukraine nowadays.

“What’s happening in Ukraine now is all people can do. You can do nothing but go to [Kiev central square] Maidan [Nezalezhnosti] and protest… I think this is what’s called a dictatorship,” he made a grim conclusion.

In the meanwhile, officially the Ukrainian government is an avid supporter of tech innovations and IT business. Over the past few years, special tax conditions have been created for the industry as top public officials speak with one voice of encouraging the young generation to become IT professionals. Now, there’s little left to do — just pass from words to deeds.

Image credits: Shutterstock, Shutterstock, Nadine Rupp/Getty Images, YURIY DYACHYSHYN/AFP/Getty Images