Lawsuits and leverage
By early 2014, Mr. Durov felt the strain of the ownership struggle. Russia was also in the midst of a growing battle with Ukraine over that country’s future, which was playing out in comments on VK. A week after Mr. Tavrin sold his shares to Mail.ru, VK’s board received a resignation letter from Mr. Durov, dated March 21, 2014.
Mr. Durov wrote on his VK page that in the past year, “the freedom of action of the CEO in managing the company [has been] significantly reduced. It is becoming increasingly difficult to defend those principles which were once laid [as] the foundation of our social network.” With trademark irreverence, the post ended with a picture of two leaping dolphins and the caption, “So long and thanks for all the fish.”
“He felt he couldn’t withstand the pressure,” said Anton Nossik, a well-known Russian blogger and online media expert. “Usmanov was behind Durov all the way until the moment when, in the Ukrainian situation, in the wartime situation, Usmanov could not help him deny the FSB access to Ukrainian users’ data.”
But in a bizarre twist, Mr. Durov changed course. In the early morning hours of April 3, 2014, he sent shareholders an e-mail saying his resignation had been an April Fool’s joke. The board was scheduled to meet that day to discuss naming a successor. And amid all this confusion, UCP was filing a lawsuit against Mr. Durov, Mail.ru Group and others, claiming Mr. Durov had used company resources to develop a competitor company.
That suit was filed in court on April 4, 2014 – a day after Mr. Durov tried to retract his resignation – in the British Virgin Islands, where most of the companies that own VK’s shares are registered. It alleges that Mr. Durov breached his fiduciary duties to VK by diverting resources to another business he is now helping run, and that Mail.ru’s representatives have taken de facto control of the company.
That wasn’t the only trouble brewing. VK also ran afoul of three major global music labels in early April – Sony Music Entertainment, Universal Music Group and Warner Music – which filed separate lawsuits alleging that a music streaming service built into VK profiles was filled with pirated songs.
On April 21, Mr. Durov did another about-face, announcing that he was, indeed, out as CEO and claiming on his VK page that he’d been fired. But the board ruled that he had in fact resigned. “Probably, in the Russian context, something like this was inevitable,” Mr. Durov wrote in a wistful VK post on April 21. He did not respond to repeated requests for interviews.
Two sides to the story
Ever since Mr. Durov left VK, there have been sharply different narratives about his motivations.
His supporters say he is a visionary who lived with modest means and drove the company with stunning success. But in its lawsuit, UCP alleges Mr. Durov spent well beyond his authority while in charge at VK. The suit alleges he paid himself $1.2-million in salary and another $700,000 in bonuses and holiday pay in 2012, when his contract entitled him to a base salary of about $205,000. It also alleges that between January and September of 2013, he filed $1.3-million in “travel expenses,” nearly $750,000 for “corporate events, trips and theatre tickets,” and $64,000 for tickets to the Sochi Olympics, all while receiving about $1.7-million in remuneration. The allegations have not been proven in court.
Lately, Mr. Durov has cast himself in the role of a political fugitive who had to leave Russia, and there is little doubt he genuinely felt pressured. When posting the letter from the FSB on VK, he noted that he had had “to sacrifice a lot,” but it was worth it to keep “a clean conscience and ideals that I am willing to defend.”
UCP and Mr. Sherbovich see things differently and are now going after Mr. Durov over his new venture, a messenger service called Telegram.
Launched about a year ago, Telegram is a free mobile instant messaging service with more than 35 million users, similar to the popular WhatsApp. But Telegram bills itself as more secure, with “Secret Chats” using end-to-end encryption that leave no trace on servers and can even be set to self-destruct. Mr. Durov supported and helped build it while still CEO at VK, along with his brother, Nikolai Durov, a shy but brilliant mathematical mind who was VK’s chief technology officer until he, too, left the company.