An untold litigation story of how Divan.TV failed to pay $60k to Rupert Murdoch’s Fox. AIN.UA’s big investigation
In late 2018, Divan.TV Internet TV service announced that it was preparing for the ICO – the initial issue of tokens to raise investment. According to the presentation that was made for potential investors, the service already had 3 million users spread across 200 countries.
The ICO should have increased this number 40-fold by 2022 – to a phenomenal 120 million (for comparison, Netflix has 167 million paying subscribers). It was expected that Divan.TV 2.0 on the blockchain would start working from the end of 2019. The year 2020 came, and the ICO didn’t happen. Moreover, nobody has talked about it for almost a year now.
AIN.UA journalist could not confirm Divan.TV’s performance indicators in conversations with current and former content providers. The company did not respond to AIN.UA requests. Andrey Kolodyuk, the founder of the project, also did not respond to AIN.UA’s requests repeatedly sent to him via email and social media.
But what we managed to find out was multimillion lawsuits and debt to Fox. Before the acquisition of Fox by Disney in 2019, the company belonged to American billionaire Rupert Murdoch.
AIN.UA journalist traced the chronology of how the debts were “reregistered” to a saleswoman from Obukhiv [Editor’s note: a small town in Ukraine], as well as analyzed the unclear business performance indicators of the service in the media and presentations for investors.
Local media called Divan.TV as our own ‘Netflix’. Divan.TV is an OTT service that provides Internet television services: there are both familiar TV channels and movie/series streaming. Since 2015, the CEO of Divan.TV is Arkadii Kaniuka.
Andrey Kolodyuk is the founder and owner. In the past, he was a co-owner of City.com retail chain. Currently, besides Divan.TV, he is also a managing partner of AVentures Capital, initiator and chairman of the Ukrainian Venture Capital and Private Equity Association (UVCA), initiator of Ukraine House Davos.
Divan.TV, on which Kolodyuk began working back in 2008, was publicly launched in 2011. In 2019, he informed potential investors about $5 million in revenue per year, achieved break-even results in 2018, and 60 employees in 5 offices around the world.
However, after the audit, it turned out that much of it was compromised.
Welcome to Ukraine, Rupert Murdoch
In 2015, the representative office of the U.S. media giant Fox (Swiss Fox International Channels Luxembourg) sued Divan.TV. The Ukrainian service did not pay for the content. It accumulated a debt of ₴1.5 million. In 2017, RBC Ukraine already described the status of this case.
In September 2016, the Economic Court of Kyiv resolved that Divan.TV (represented by LLC Divan.TV) should pay Fox $57,400 for broadcasts from January to September 2014. Kyiv Commercial Court of Appeal finally rejected the appeal of the defendant on November 22, 2016.
Later, the press service of Divan.TV admitted that the company had a debt and repayment plans. But the plans remained just plans. Divan.TV complained about Fox’s unwillingness to reach a compromise:
All channels, except Fox, have renegotiated their contracts with us on new terms. The owner of Fox, represented by Rodion Pryntsevsky, General Manager of Fox Networks Group in Northeast Europe, refused to come to mutually beneficial agreements, putting us in non-competitive conditions. <…>
But when they [Editor’s note: Fox] began to issue invoices even after our official request, we refused to repay the debt.
Representatives of Divan.TV informed RBC-Ukraine that they have never repaid the debt.
That was the end of a previously known part of the story.
Mug’s game: two Divan.TV
An unknown part of the story began almost simultaneously with the end of the trial. Divan.TV just got rid of a legal entity with debts. A step-by-step chronology of this scheme is given below.
In March 2016, six months before the court ruled in favor of Fox, Arkadii Kaniuka became the director of Divan.TV. He has been the CEO of the service since 2015, and now he is also the director of the legal entity.
In November 2016, a week before the appeal was denied, Divan.TV LLC changed its name. The company began to be called Multimedia Group Ukraine LLC, and Lubov Polishchuk became one of its representatives in court by Power of Attorney.
Four months later, in March 2017, Lubov Polishchuk replaced Arkadii Kaniuka as the director of Multimedia Group Ukraine LLC. And three months later, in June 2017, Polishchuk became the full owner of this legal entity.
Since 2012 the owner of Divan.TV LLC was a Cyprus company Mikarnial Ltd, whose key beneficiary and controller is Andrey Kolodyuk. However, at the same time, when Polishchuk took up the position, Mikarnial Ltd, and therefore the entrepreneur himself, left the ownership of Multimedia Group Ukraine LLC. Divan.TV did not comment on such reshuffles neither then, nor now.
In a nutshell
Divan.TV service operated through the legal entity Divan.TV LLC. In late 2016, having lost the case, the legal entity changed its name to Multimedia Group Ukraine LLC.
Then at the beginning of 2017, the beneficiary and the director – Kolodyuk and Kaniuka – left it. In fact, the legal entity, which had financial obligations to Fox, was left by those who accumulated those debts.
Who appeared in the legal entity instead of them?
Journalist of AIN.UA could not contact Lubov Polishchuk. However, according to YouControl, she (or her full namesake with an identical address) is listed as a manager in 22 other companies. It was also impossible to contact other representatives of Multimedia Group Ukraine LLC, the contact details of the company from the registries are invalid. And this is not an accident.
Lubov Polishchuk is not a serial entrepreneur but a saleswoman from Obukhiv, as journalists of Bihus.info found out. She sold her passport data, which was used by dozens of legal entities. Among those fictional companies are, for example, an Opposition Bloc party donor and a company that has been involved in corruption scandals.
All this time, the Divan.TV service hasn’t stopped working. However, instead of Multimedia Group Ukraine LLC (formerly called Divan.TV) it has a new legal entity – Finart Capital Invest LLC. Previously, this company was owned by Kaniuka and engaged in financial services, and, since March 2017, the notorious Mikartial Ltd became the owner of the company. The transfer took place simultaneously with the appearance of Lubov Polishchuk in the former Divan.TV LLC.
Finart Capital Invest LLC is the recipient of funds for the service Divan.TV, it is also listed on the website of Datagroup as a provider of Divan.TV service. At the same time, according to the service offer, now all services are provided by Mikarnial Ltd. This company also owns trademarks of Divan.TV, and publishes service applications for Android and iOS.
Co-owners of Mikarnial Ltd, which is still behind Divan.TV, as of the beginning of 2020 are already well-known Andrey Kolodyuk, Denis Lukash, and Arkadii Kaniuka. Ownership is carried out through a number of legal entities: Meresta Investment Limited, Medoliv Trade Inc., For-com LLC, etc. Denis and Arkadii are minority shareholders – they have 6% and 1% of the shares, respectively.
It is noteworthy that the founder of Mikarnial Ltd was Sykon Holdings Ltd, which performed secretarial functions (registered and transferred legal entities to others) for more than 100 companies. It appeared in the corruption schemes of the former Minister of Energy Eduard Stavitsky and a number of other scandals.
After the Ukrainian court sided with Fox in November 2016, the enforcement service gained access to Divan.TV / Multimedia Group Ukraine legal entities accounts. No money was found there, the debt could not be written off – this is confirmed by the fact that the case is still open on the website of the enforcement service, as well as according to sources familiar with the situation.
In a nutshell
Fox did not sue Divan.TV service (it is impossible to sue the service), but the legal entity that stood behind it and to which Fox provided video content – Divan.TV LLC.
After losing the litigation, the beneficiary and manager left the legal entity together with the service’s assets, and the obligations were transferred to a saleswoman from Obukhiv.
Meanwhile, Divan.TV service got itself has a new legal entity to conduct its day-to-day operations. The owner of the new legal entity is the same as in the past – Mikarnial Ltd, the beneficiary is the very Andrey Kolodyuk. However, it is now also known that his team members got small shares too.
In Divan.TV, the change of ownership of Divan.TV LLC that lost the litigation to Fox, was never explained publicly. It was only reported that the new team has no control over the former legal entity.
The sale raises questions: if this is a real deal, then what did the buyer in the person of Polishchuk get except for the legal entity that lost the court? The service began accepting money through a new company, and Mikarnial LTD retained all trademarks. There is no official answer, but AIN.UA got an audio recording that sheds light on some previously unknown things.
On the recording, people who introduced themselves as Divan.TV employees – CEO Arkadii Kaniuka and Content Procurement Director Elena Kohanets – talk to a person who introduced himself as Rodion [Pryntsevsky, Fox Regional Manager in Ukraine]. The subject of the conversation, which can be dated to the end of 2017, is the payment of Divan.TV’s debts to Fox and the resumption of cooperation.
E.K .: – In fact, the legal entity that signed the contract – LLC Divan.TV is no longer under our control. We have no power over it. This lawsuit forced us… We had huge financial problems and we would not have survived it. We had to sell our software solution along with debts in full. Divan.TV service and legal entity are two different things.
When asked whether evasion of paying debts was a lie, people who introduced themselves as top managers of the service answered in the affirmative:
E.K .: – Back then it was the only way to postpone the issue until the moment when it would really be handled.
R.P.: – So you lied to us?
E.K .: – Well, probably. Although in business it is called differently. But in fact, Andrey Viktorovich left the service for his personal reasons, unknown to anyone. And he said: “Try to decide as you see fit.”
As a result of this conversation, people who called themselves representatives of Divan.TV in 2017 wanted to sign a new cooperation agreement with Fox. They offered to pay the debts through the Cypriot offshore Micarnial Ltd, and only after Fox resumed the streaming. The man who called himself the Fox representative responded with a willingness to turn on the streaming, but only after the debts are paid. There is no Fox content on Divan.TV today.
Ctrl + C, Ctrl + V – “Continent TV”
The same story was publicly told by Continent TV CEO Dmitry Tatsiy. This is another provider who won a lawsuit against Divan.TV for pirate streaming:
- In May 2016, Continent TV was in talks with Divan.TV regarding the distribution of the Trophy, Trophy HD channels. The contract was not concluded, but Divan.TV still streamed channels from May 1 to September 30, 2016. The service denies it.
- In October 2018, Continent TV LLC went to court, asking LLC Multimedia Group Ukraine, known to us as ex-Divan.TV, to pay UAH 169,650. The Commercial Court of Kyiv refused to satisfy their requirements.
- The court of appeal upheld the claim but reduced the amount of compensation to UAH 96,050. They had to be written off from Multimedia Group Ukraine LLC (the successor to Divan.TV LLC).
But is there anything to take from a debtor who has been transferred into the ownership of a saleswoman from Obukhiv? According to the YouControl analytical system, as early as April 2018, the Multimedia Group Ukraine had their VAT certificate canceled – the company did not file a declaration within a year. It also has incurred a tax debt in the amount of UAH 5,665 and has had no revenues since 2016.
When Continent TV won the litigation, its CEO Dmitry Tatsiy publicly accused Divan.TV of changing legal entities. His words in Detector.Media repeat the Fox scheme described above:
Previously, the company provided service as LLC Divan.TV, then this legal entity was renamed to Multimedia Group Ukraine LLC, and in the future, it was changed to another legal entity Finart Capital Invest LLC. Such active actions to change legal entities, together with high-profile litigation, testify to the company’s intentions to avoid financial responsibility for lost court cases.
In response, Arkadii Kaniuka said only that Multimedia Group Ukraine LLC is not related to Divan.TV brand.
There were others
In general, Divan.TV almost from the very beginning had problems with copyright holders. Even at the dawn of its existence, the largest Ukrainian media groups were suing the company for illegal broadcasting of “1+1”, “2+2”, STB, “New Channel”, ICTV, and “Ukraine” channels. In 2015, it came to seizing the servers, which, it should be noted, were returned two months later due to failure to prove Divan.TV’s guilt.
In recent years, Divan.TV has been accused by other companies of failing to fulfill financial obligations, and those companies also won in court:
- Lawsuit from the MGB Ukraine (History TV channel) for UAH 297,000.
- Fox lawsuit for $ 57,000.
- Lawsuit from Continent TV for UAH 96,000.
- Lawsuit from “Tekhnologii setei” for UAH 218 000.
- Lawsuit from Mediakast for UAH 154,000.
- Lawsuit from the Russian TV channel Dozhd for an unknown amount in a Russian court. Previously, a fine of UAH 350,000 was in the news.
AIN.UA contacted all the companies from the list. Only the Russian Dozhd and Continent TV did not respond to requests. The rest either said that they settled the issue, or gave non-public comments that were used to verify the remaining evidence.
Multimillion user base was ‘made up by the PR-service”
Tatsiy from Continent TV brought another accusation: when signing contracts, the company manipulates data on the number of subscribers:
Divan.TV declares in open sources that it provides its services in more than 200 countries and declares its subscriber base at the level of 700,000 subscribers. However, when it comes to negotiations about granting distribution rights for channels, Divan.TV underreports its base and specifies numbers that are hundred times less.
Representatives of Divan.TV did not comment on that. The size of the user base is important because content providers charge a flat fee for services. In Ukraine, it ranges from UAH 5 to 95 per each user that is subscribed to a paid package. It is beneficial for the Internet TV service to understate numbers in a conversation with content providers and to overestimate them for PR, including confusing paying subscriptions with lifetime registrations.
People who introduced themselves as top managers of Divan.TV, on the audio recording mentioned above, recognize the discrepancy between public and real data. Another quote from their conversation:
R.P.: – We constantly read in the press how successful you are, how many years you have already been profitable, and how all is well.
E.K .: – For this, we have a PR department. Do you believe everything that is written on the Internet?
R.P.: – I don’t know. We publish the truth about our company.
E.K .: – This is the choice that you made, we have a different choice. We have a PR department and it [works] separately. We often hear from many partners such statements [about the success of the project], but then we give access to billing and the questions disappear. You read one thing, and then you look and it is written in small print: “These are all subscribers not registered on a paid basis.” We understand that now it’s practically impossible to lie to about the subscriber base. We have never had 40,000 subscribers. And we cannot even dream about such a huge user base now – because we do not have such good content as others have.
The woman who introduced herself as Elena Kohanets tells another reason why the service needs to manipulate the user base – that is its activity in Western markets:
E.K .: – PR is focused more on the international market for attracting b2b partners from all over the globe. Somehow it is a custom to provide all the information in a good light. We do not interfere there. Free subscribers and views are written…
How much profit does Divan.TV generate and off of what?
In a presentation by Andrey Kolodyuk for potential investors in February 2019, the service has 3 million users, who brought $5 million in revenue in 2019. But how many of the claimed 3 million users are paying users remains unknown. Unlike Netflix, many users of Divan.TV are not paying subscribers. And unlike Megogo, there is practically no monetization of users with a free package through advertising.
According to the source of AIN.UA’s editorial office in one of the content providers, the paying audience of Divan.TV in 2014 was 5,000 people globally, and in 2019 – 10,000 – 20,000 globally subscribed to a basic paid tariff. This is unverified data. But we are still talking about tens, not hundreds of thousands of paying users. The editors of AIN.UA below offer several approaches to checking the claimed revenue of a service.
For example, for Megogo to generate $ 5 million in revenue in 2017 on the Russian market (which is also the main one for Divan.TV, according to their own presentation), 350,000 users made at least one payment to it.
Based on the cost of Divan.TV subscription plans (from UAH 59 to 299 per month for Ukraine and up to $13 per month abroad) in average proportions, the service needs at least 500,000 paying users to generate $5 million per year.
350,000 or 500,0000 – all this is far more than the 40,000 paying users mentioned in the audio recording. Which, moreover, is declared as a difficult goal to achieve.
According to YouControl, LLC Divan.TV / Multimedia Group Ukraine showed a peak revenue of about UAH 14 million in 2016. And that is with the obligations of the company amounting to more than UAH 52 million.
Finart Capital Invest LLC – which accepts service payments in Ukraine – in 2017 showed UAH 13 million in revenue. In 2018, revenue decreased to UAH 10 million.
If it is true that according to Divan.TV, 54% of users are in the CIS, and the largest market in Russia, then Ukraine, at best, has a quarter of the audience. If we calculate that it brought in UAH 13 million, then the global revenue of Divan.TV in the most optimistic scenario would not exceed $2 million. But there is a nuance here.
Russia, as stated in the presentation, is the largest market for the service, but the Russian branch of Divan.TV LLC with registration in Belgorod does not demonstrate this.
According to the extract from the SPARK database (which is in possession of AIN.UA editorial office), the total debt of the enterprise is about 2.4 million rubles, while current assets are only worth 27,000 rubles. The company showed its revenue only once, in 2016, and it amounted to 585 (five hundred eighty-five) rubles. And in July 2019, by a court decision, Roskomnadzor also deprived Divan.TV LLC of mass media status and a broadcast license, according to the regulator’s website.
All that put together casts doubt on the veracity of alleged Divan.TV revenue. And user bases.
Another question is how much investment the service attracted and from whom.
At the start of the project in 2011, it was reported that AVentures Capital invested $1 million. Later, in an interview with AIN.UA, Andrey Kolodyuk said that the investment account “is well into the millions.” Crunchbase reports that AVentures has invested $2.5 million in Divan.TV spread over two rounds between 2010 and 2011.
AIN.UA also managed to find a CV of the partner and co-owner of Divan.TV Denis Lukash, where it is indicated that he helped the company to raise $1.2 million in two rounds between 2010-2014. Finally, according to the presentation prepared by Divan.TV for investors, by 2019 the company raised a total of $6 million in a single round.
Divan.TV is still listed on the unofficial website of the AVentures Capital [Editor’s note: the unofficial website is listed in the fund’s profile on CrunchBase, the partners of the fund write emails from its domain, but the author couldn’t find the official site]. However, AVentures was not found among the legal structures of companies whose connection can be traced back to Divan.TV.
Yevgen Sysoyev, a Managing Partner of AVentures, confirmed this: Divan.TV is Andrey’s personal project. Why it appears on the fund’s website is unknown.
ICO that never happened
In 2018, Andrey Kolodyuk actively commented on Divan.TV’s plans to enter the ICO. The company planned to launch its own D1T token in the second quarter of 2019, and the updated Divan.TV 2.0 platform in the third quarter of 2019. Users would have to receive tokens in exchange for viewing ads and spend them to access premium content.
To launch a blockchain platform for advertisers, Divan.TV planned to attract bridge financing in the amount of $5 million. This is a short-term loan for the development of the company at 8% interest and without dilution of interest. Investors were promised a 20% discount in the next round.
Among others, Alexander Bornyakov, founder of the advertising company VertaMedia (Adtelligent), and now – Deputy Minister of Digital Transformation of Ukraine, was specified as a technology advisor and investor in the service.
In response to a request from AIN.UA, Alexander Bornyakov said that Divan.TV was going to use its Adtelligent platform. They really started working with Kolodyuk in 2018. But three months later, Kolodyuk decided not to hold an ICO: supposedly this is no longer interesting to anyone. “It became clear that there will be no ICO,” Bornyakov noted in a comment to AIN.UA. For a while, the companies still worked together, but it did not lead to anything concrete.
Now no one remembers the ICO. As well as plans to reach 120 million users. Or about debts to the American company Fox, which have not been repaid.
In the meantime, the service continues to work, carries out advertising campaigns, and enters into partnerships with TV producers. And Andrey Kolodyuk himself has already approved the idea of Alexander Tkachenko (in the past the general producer 1+1, currently the MP from the “Servant of the People” party) to introduce a tax on Netflix and YouTube content. After all, foreign services “should be put in the same conditions as Ukrainian services in terms of taxes.”
But as far as the same conditions for paying debts and disclosing performance indicators are concerned – he did not provide any details. In December 2019, his Cypriot Mikarnial Ltd increased the authorized capital of Finart Capital Invest LLC by UAH 1.7 million: from UAH 804,000 to UAH 2.56 million. This is more than what is owed to Fox. Nonetheless, the debt is now on the shoulders of a saleswoman from Obukhiv.