Not So Green On The Other Side: How A Russian Tycoon’s Big U.S. Cannabis Bet Went Up In Smoke
22 May 2020

When the authorities in Plumas County, California, inspected a new commercial hemp plantation in April 2019, they were so alarmed by what they found that they sought to impose a temporary moratorium on the emerging industry in unincorporated local towns.

Greeted at the property by two armed guards with false identification papers, the local authorities found “one of, if not the largest, hemp operation in the state of California” with trees cut down and carted away, greenhouses going up and drainage being built without permits, they said at a public hearing two months later.

Representatives of Genius Fund, the cannabis-focused start-up based in Los Angeles that was developing the roughly 1,000-acre spot — the size of about 750 American football fields — told Plumas authorities they were cooperating with two research universities, tapping a California legal loophole that would allow them to begin operations without all the permitting. However, Plumas officials said they contacted the universities and neither confirmed a relationship with the company. Shortly thereafter, Genius Fund left the county.

“It demonstrates a flagrant disregard for our county, our rules, our regulations, our building codes,” then Plumas County Sheriff Greg Hagwood told the June 4, 2019 hearing. “To engage in something this flagrant speaks to a frame of mind. And I find it very disturbing and I find it unacceptable.”

It was just the start of the troubles Genius Fund would face over the next 12 months as it aggressively sought to carve out a chunk of the multibillion-dollar California cannabis market. Today, the phones at the company are silent, corporate e-mails bounce, the company’s website is down, and counterparties are starting to sue.

Genius Fund might have been just another failed and forgotten cannabis business — the ranks of which are growing as the COVID-19 pandemic impacts operations — had a former senior employee not filed an eye-opening lawsuit in a California court on April 24 claiming its billionaire owner, Dmitry Bosov — who died weeks later in what Russian authorities said was a suspected suicide — had blown $165 million on the operation without generating much revenue.

The lawsuit goes on to claim that Bosov had his U.S. visa rescinded in the midst of launching the vertically integrated business and, as it imploded a year later, transferred ownership in March to his Soviet-born, New Jersey-based friend and adviser — a man with an opaque employment history who goes by multiple names and who, in 2018, was caught up in a bizarre international chess scandal involving a longtime Russian regional leader who is under U.S. sanctions and once claimed to have been abducted by space aliens.

Bosov and adviser Igor Shinder, the lawsuit alleges, had created a Byzantine corporate structure with more than 60 “sub-entities” at its height and were now transferring assets and selling off assets to avoid creditors, a claim the defendants rejected.

The list of people involved with the fund has included a managing partner whose father is a former Russian cabinet minister now jailed and awaiting trial on an embezzlement charge, two new board members who are partners of a former FBI director, a U.S. Army Special Forces veteran, and several young tech executives with little to no experience in cannabis or running large businesses.

Bosov, 52, was found dead May 6 at his sprawling mansion outside Moscow with a bullet wound to the head from his own pistol, law enforcement authorities said — reportedly after locking himself in the fitness room. He was the beneficial owner of the Genius Fund, according to documents submitted as part of the civil complaint filed by Francis Racioppi, who worked at the company for about a year, including briefly serving as CEO.

Daniil Abyzov, son of billionaire former Russian Minister of Open Government Mikhail Abyzov, was one of three managing partners at Genius Fund, according to its now defunct website. However, he left the company earlier on, an employee who asked not to be named, told RFE/RL. Daniil Abyzov — also known as Danny — could not be reached by RFE/RL on a mobile phone that had been registered under his name.

Mikhail Abyzov, reportedly a close friend of Bosov and rumored to have been a partner in his coal business, was arrested in Russia in 2019 on suspicion of stealing $62 million from a Siberian power-supply company and moving the money offshore. 

He was a cabinet minister between 2012 and 2018, and is considered a close associate of Dmitry Medvedev, who was Russia’s president from 2008-12 and then prime minister until President Vladimir Putin dismissed him in January. 

After leaving the government in 2018, Mikhail Abyzov briefly lived in the United States around the same time Bosov was launching his cannabis business.

Wild 1990s

Bosov, who had a net worth of $1.1 billion according to Forbes Magazine — which listed him 86th among Russians in terms of wealth — began building his fortune in the violence-plagued Russian aluminum industry in the 1990s, when he was reportedly the right-hand man of Michael Chernoy, then one of the nation’s richest people.

Bosov sold his stake in the Krasnoyarsk Aluminum Plant and invested in a Siberian oil producer in 2004 just as energy prices were taking off, multiplying his fortune. He later left that business to focus on coking coal, creating Siberian Anthracite in the 2010s.

He also co-owned an Arctic-based coal business with Aleksandr Isayev, a member of Siberian Anthracite’s board. In April, Bosov removed Isayev from all positions, including co-ownership, accusing him of “egregious abuse and theft.”

Bosov controlled 80 percent of Genius Fund through his offshore holdings Alltech Group and Goldhawk Investments. The court documents did not state who owned the rest, but the company’s founders — Ari Stiegler, 28, and his business partner Gabriel Borden — could possibly own some if not all. Anyone owning 20 percent or more of a cannabis company in California has to inform state regulators.

Racioppi, a former Army Special Forces member who The Wall Street Journal reported was forced out of social-media giant Snap over an affair with a contractor, claims Bosov “concealed and misrepresented the true and equitable owners of the Genius Fund” though without stating how and to whom. There are no restrictions on foreigner ownership of cannabis companies in California. Neither Racioppi nor his lawyer responded to requests for comment.

RFE/RL has yet to receive an answer to a public information request filed with Californian authorities in an attempt to determine who registered as owners of the Genius Fund.

By Todd Prince, RFE/RL, 21 May 2020

Read more at RFE/RL

Photo (cropped and edited): WPD [CC BY 2.0] via Flickr

RiskScreen: Eliminating Financial Crime with Smart Technology

Advance your CPD minutes for this content, by signing up and using the CPD Wallet

FREE CPD Wallet