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Busting a Dragon – Ukraine

April 26, 2017

Dragon Capital, probably Ukraine’s premier investment company was subjected to a raid by the SBU on 26th April.  The company facilitates direct investment and financial services, providing a full range of investment banking and brokerage services to corporate and private clients.

The mens rea behind the SBU raid, the alleged use of illegal software.

Prima facie anybody would ask why not raids to recover the tens of thousands of government and local administration computers that run on pirated Microsoft software?  Why a private and successful business before the issue of State hardware running on illicit software?

Yet others would ask whether this be a SBU priority in the current circumstances Ukraine finds itself within.

The SBU has stated that Dragon Capital was but one of eight companies using illicit Russian software within which is naughty Russian spyware.  “Last year, law enforcement officers in criminal proceedings opened under Part. 2, Art. 359 of the Criminal Code of Ukraine stopped the activities of businesses which illegally implemented in Ukraine, the Russian software. During the pre-trial investigation operatives of intelligence agencies have established several companies, associations and companies, the leadership which knowingly bought illegal software.”

In response Dragon Capital has stated that its software is legitimate and paid for.

Upon learning of the SBU raid, Prime Minister Groisman made a carefully worded statement “I have no right to interfere in the work of the SBU, but I believe that everything should be done adequately without paralysis of the work of the investment fund.”

Clearly the Prime Minister is quite aware that the SBU actions may cause investors to leave Dragon Capital and therefore the Ukrainian market, but is also mindful that overt and direct interference in the SBU operation is also not a PR win either when there is a perception of a weak grasp of rule of law and within that weak grasp political meddling.

As it seems clear that he was not aware the raid would occur, he may also be fence sitting (for now) lest what the SBU discover be damaging to the private clients of Dragon if the Russian spyware is particularly effective – no doubt any intent would be malicious.

Without knowing which particular software is the subject of this investigation, it is difficult to understand either narrow or broader consequences for Dragon, its clients and Ukraine.

If the SBU produce a case that is clearly harmful to clients and or the State via what is extracted through the Russian spyware/software, rather than a simple (and many will perhaps perceive lame) copyright case that is one thing.

If however Dragon Capital do have entirely legitimate and lawfully owned software, the question is therefore who benefits, or sought to benefit, from the Dragon Capital raid and any subsequent repercussions?

There is currently something of a “smell” about this incident.

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