U.S. Firm’s Extreme Network’s Top Manager Secretly Sold High-Tech Equipment in Russia

Extreme Networks Inc, a U.S. technology company, faces scrutiny as it is discovered that its top manager in Russia secretly continued doing business in the country, despite the company’s public announcement of suspending all activities in support of Ukraine.

Sergey Gusakov, who held a senior position at Extreme, established his own company to supply Russian clients with IT equipment from a competitor of Extreme Networks, according to sources familiar with the matter and Russian corporate and customs records.

Gusakov’s company, Vektor-T, sells IT equipment in Russia that is assembled in China and contains U.S. microprocessors.
The upshot: microprocessors produced by U.S. chip companies that have banned sales of their products to Russia – as Extreme did – have made their way to the country embedded in Chinese equipment, illustrating the limitation of U.S. trade restrictions.

Thus, even though U.S. chip companies have banned sales to Russia, their microprocessors can still find their way into the country through Chinese-made equipment.

When contacted by the media regarding his private business activities, Gusakov dismissed the claims as fiction. However, it has been revealed that Gusakov has been involved in these parallel business ventures for over a year, despite a colleague’s warning to Extreme Networks’ top management in the summer of 2022 about the potential violation of company rules.

A leading media investigation late last year showed how voluntary export bans by tech companies and broader Western sanctions adopted after Moscow launched a full-scale invasion of Ukraine in February 2022 haven’t stopped billions of dollars of computer and other electronic components from flowing into Russia through networks of third-party suppliers.

Gusakov has been running his parallel venture for more than a year despite a co-worker alerting Extreme’s top management in the summer of 2022 that his involvement in sales of technology on the side to Russia could violate company rules.

Extreme Networks’ spokespersons acknowledged an ongoing investigation by the company’s legal department and outside counsel but declined to comment on Vektor-T’s operations, citing it is beyond the company’s control. They also did not provide any details about Gusakov’s current status with the company. The spokespersons emphasized Extreme Networks’ commitment to complying with U.S. export controls and stated that the company does not engage in any business activities in Russia.

The spokespeople said Extreme “takes very seriously its obligations to comply with U.S. export controls” and does no business in Russia.

Sergey Gusakov, Many Russian Resellers, Extreme Network

In April of the same year, Extreme Networks underwent a reorganization, relocating Sergey Gusakov, along with a few members of the Moscow staff, to Kazakhstan, as per knowledgeable sources. Despite joining Extreme Networks in 2010 and retaining his title as a regional manager for the Commonwealth of Independent States (CIS), which comprises former Soviet republics, Gusakov co-founded his own company, OOO Vektor-T, in the Russian city of Oryol, on April 13, 2022. Notably, he did not inform Extreme Networks about his new venture.

Vektor-T’s website, registered three weeks prior to Gusakov’s establishment of the company, states that it develops and manufactures a range of computer networking equipment for the Russian market.

According to a legal filing, the company generated approximately $1 million in revenue last year. Vektor-T’s products, manufactured in China, are supplied by Yunke China Information Technology Ltd, also known as DCN. Photographs obtained by Reuters comparing the internal components of switches sold under the DCN and Vektor-T brands clearly demonstrate their identical nature.

Gusakov and Vektor-T declined to address questions concerning the use of DCN technology. However, DCN confirmed its export of products to Russia while refraining from commenting on its business relationship with Vektor-T. Russian customs records reveal that DCN exported equipment worth at least $11 million to Russia, including shipments destined for Vektor-T, over a period of 12 months until March 31.

According to sources familiar with the matter, DCN products incorporate U.S. microprocessors from Marvell Technology Inc, based in Wilmington, DE, and Lattice Semiconductor Corp, located in Hillsboro, OR. Obtained photographs of switches sold by both DCN and Vektor-T, which clearly show the presence of microprocessors from each of these U.S. companies.

A senior executive from DCN acknowledged their reliance on Marvell’s semiconductors for some products, noting that the U.S. company has numerous resellers in China. However, regarding Lattice, the executive initially stated that DCN utilizes their computer chips but later retracted the statement, claiming they do not use them. The executive emphasized that the U.S. technology component in DCN products is minimal.

When questioned about whether DCN possesses authorizations from Marvell and Lattice to export their products to Russia, the DCN executive declined to comment. Marvell informed that it does not sell to Russia, requiring distributors and their customers in China to certify that products will not be resold to Russia.

A Marvell spokesperson acknowledged that although the company had not directly shipped to DCN in the past decade, it cannot always track the final destination of its products.
Lattice stated that it ceased all sales to Russia when Ukraine was invaded and affirmed its compliance with U.S. export regulations. However, the company did not address media inquiries regarding DCN’s status as a customer.

The Last Bit, The case of Sergey Gusakov, a top manager at Extreme Networks, secretly selling high-tech equipment to Russian clients despite the company’s public suspension of business activities in Russia, raises concerns about the effectiveness of trade restrictions.

It shows how microprocessors from banned U.S. chip companies can still reach Russia through Chinese-made equipment. Thus, the investigation into Extreme Networks is significant, as it could have severe implications for the company’s reputation amid the ongoing conflict in Ukraine.
This incident further emphasizes the challenges of fully curbing the flow of electronic components to Russia through alternative channels despite existing export bans and sanctions.