Ukraine Business Closes the Ranks around the Blockchain

News and Analysis
18.11.2015

A search in the house of one of Ukraine’s bitcoin community leaders, Mikhail Chobanian, triggered a series of events. Just two weeks afterwards, his lawyers managed to obtain a court ruling to remove an attachment of the seized property.

“Today my lawyers won the case on the attachment of the seized property! They did it three times. Twice the court refused the prosecutor to arrest the property, but they filed a petition. Today we won that as well. They will return everything! That’s the people’s strength in action,” Chobanian wrote on Facebook.

In particular, the court ruled that all 39 technical items (laptops, cell phones, Kuna vouchers, and SIM-cards) had been arrested illicitly, and have to be returned immediately. The police searched for the facts that he had been engaged in bitcoin activities, as well as for media and devices that might store bitcoins. However, the court ruled that the enforcement had been acting illicitly, as they had no court leave to perform such investigatory actions.

Following a wide coverage in the social media, and local and international press, it turned out that Chobanian was not the only entrepreneur who had faced a non-motivated pressure from law enforcement.

In 2015, a series of searches at premises of IT companies and houses of particular involved entrepreneurs occurred in Ukraine. Searching were not only the police, but also the prosecutor’s officers and tax authorities. In most cases it all ended up in seizure of devices, and attempts to convict the entrepreneurs in cybercrime, tax evasion, and other crimes.

Ukrainian business often faces different kinds of pressure from the law enforcement. Most of those stories remain unknown as small and medium business do not have enough resources to resist the system’s erroneous behavior.

First, the pressure is nothing but an attempt to collect additional “taxes”, or, to put it simply, a racket. The government’s tactics is to complicate or even paralyze a company’s business processes to the maximum possible extent in order to extort a bribe. Certainly, it is never an isolated instance, and, having paid once, the entrepreneurs have to continue paying on a monthly basis. Such things outrage the business, which had already lost pretty much due to political transformations in Ukraine.

“I know very well that, when I close my operations and return all the devices, there still will be no guarantee it will not repeat tomorrow. No guarantees whatsoever. For that reason, my claim is against the system altogether, not the people, but the system itself. It is the established corporate culture in the country,” says Chobanian.

If we consider a standard corruption situation in Ukraine, it would look more or less as follows: there is a criminal proceeding filed against a person in order to extort money, on a competitor’s request, or for other illicit reason. Information on that case and all involved circumstances is in a database (in most cases, it is a bunch of paper or electronic files), which is accessible for changing only to a small number of authorized officers (officials, police, etc.)

Let’s assume that the person willing to solve the problem agrees to pay the requested sum or otherwise meet the requested conditions of the “deal”. As soon as it happens, corrupted officials use the data base to alter or even delete all information as to the criminal case in question. This model is applicable for other situations like raider seizure or bidding.

Some of our readers might think that the scheme is utterly absurdist, but, unfortunately, that is exactly the way that things go in Ukraine. Even if we assume that there’s a newcomer to the system, who has the brightest mind and ethical excellence, eventually he or she will have to submit to the established rules of the system, otherwise he or she will have to leave. This is the consensus and the algorithm of the established system.

According to Chobanian, there are two strategic targets for Blockchain Ukraine. The first is to defend against the system and have an impact on it with the help of foreign partners. The second is to create an alternate system. The second task is already in progress. A month ago, a memorandum as to establishment of an electronic government had been signed with the Kyiv and Odessa Regional Administrations. The project’s foundation is the blockchain being an open-source, distributed, and unchangeable database.

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