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The Abramovich Files: How Russian Money Funded the American Cannabis Revolution

The Abramovich Files: How Russian Money Funded the American Cannabis Revolution

Much of the start-up capital for America’s legal cannabis industry came from Russian oligarch Roman Abramovich, newly revealed records show. Here’s a deep dive from 420 Intel as to how billions of dollars of Russian money provided the catalyst for US cannabis businesses to gain market share and the awkwardness that is subsequently arising.

420 Intel

30 January 2023 at 09:00:00

420 Intel reports the 56-year-old Roman Abramovich is perhaps the best-known of the oligarchs who ended up controlling large parts of the Russian economy after the Soviet Union collapsed in the 1990s. He became a supporter of Russian President Vladimir Putin and assumed government positions after Putin took charge.


READ: How Abramovitch secretly funded the world's biggest cannabis company


After Russia’s February 2022 invasion of Ukraine, Abramovich was sanctioned in Europe, the U.K., and Canada, forcing him to sell his best-known asset, the Premier League’s Chelsea Football Club. A more detailed picture of some of his other assets is now emerging from leaked records of a Cyprus-based firm that provided Abramovich with shell companies for his holdings and officers and directors for those companies.


The records detail billions of dollars that Abramovich invested in U.S. blue-chip stocks, films, oil and gas assets, art, venture capital—and the nascent cannabis industry. He funded marijuana media like Toke.TV, sales software, and the drug’s state-licensed producers. Most of his cannabis bets came through a British Virgin Islands company called Cetus Investments, the records show. Cetus is Latin for whale, and Abramovich was truly the whale of legal weed.


The uncloaking of aspects of the oligarch’s finances began in December, when 30,000 files from Cyprus-based accounting and trust company Meritservus Secretaries appeared at Distributed Denial of Secrets, a nonprofit website. Those files were scanned by the journalism consortium the Organized Crime and Corruption Reporting Project, allowing Barron’s and other news organizations to examine thousands of records.


READ: The Guardian reports UBS and Barclays face questions over Abramovitch's billion dollar trusts


The leaked files show that Abramovich was a longtime Meritservus customer. His undisclosed funding of American cannabis was earlier reported by the news site Forensic News.


Abramovich placed a big bet on Curaleaf Holdings CURA –1.84%  (ticker: CURLF), a Massachusetts-based cannabis producer whose 146 shops in 21 states make it the world’s largest licensed pot company. The Russian billionaire’s business records show he was one of Curaleaf’s founding shareholders, and he anchored Curaleaf’s syndicated debt with some $186 million in loans. When the Ukraine war began, he transferred his cannabis investments to family members.


His funding of American cannabis was hidden behind layers of trusts and offshore companies. Abramovich’s name appeared in no U.S. cannabis company’s securities filings or publicly disclosed state license applications, according to a computer search of filings in the U.S. and Canada. When 

Curaleaf went public in 2018, Barron’s asked why an executive from Abramovich’s family office—Millhouse—appeared on Curaleaf’s board. Curaleaf said at the time that Abramovich wasn’t connected with its business.


Massachusetts regulators said last Thursday, 26 January 2023, they had opened an inquiry into Abramovich’s backing of Curaleaf and its principals and whether it had been, or needed to be, disclosed. “The Cannabis Control Commission is aware of these allegations,” said a spokesperson for the commission. “As they pertain to an open inquiry, the agency has no further comment at this time.”


Curaleaf said it is unaware of the inquiry.


In addition to Abramovich’s direct funding of Curaleaf, the records show he lent about $84 million to Curaleaf’s largest shareholder, Andrey Blokh, and its chairman, Boris Jordan, with the stipulation that they spend the money on Curaleaf stock. When Jordan started a cannabis venture fund, Abramovich supplied two-thirds of the initial capital. Abramovich separately backed Blokh with $12 million to seek marijuana business opportunities in the western U.S.


Jordan says that his cannabis loans from Abramovich were repaid in 2020 and 2021. Blokh didn’t respond to requests for comment.


“The failure of corporate transparency requirements under existing U.S. laws and regulations makes the United States a haven for dirty money and undeclared foreign investment,” says Alex Zerden, a former anti-money-laundering official at the Treasury Department, now a compliance advisor—speaking about current disclosure rules.


Curaleaf says it has complied with disclosure obligations under securities laws and state cannabis licensing requirements. The company said it sufficed to cite Cetus Investment in its securities filings, without disclosing that Abramovich was behind the entity. One or two state cannabis commissions learned during the application process that Abramovich had bankrolled Jordan and Blokh, because they asked about the financing, says Curaleaf. Other states didn’t ask, according to Curaleaf.


“We disclose everything we have to disclose,” Jordan told Barron’s in a recent interview.


Jordan says the Abramovich family office Millhouse was a “blue chip” investor sought by institutions the world over. And if the billionaire’s name didn’t appear in public filings, his identity was known to Curaleaf’s underwriters and the institutions that joined Cetus in Curaleaf’s loan consortia.


“Having him as an anchor made it easier for our bankers to then go out and raise money from other investors,” says Jordan. “The presence in the debt transaction of Abramovich’s Millhouse was seen as a positive to the market. And frankly, up until recently with the war, [it] has always been very positive.”


The funding of American cannabis by a Russian oligarch troubles Steve Rolles, who heads policy analysis at a U.K. advocacy group called Transform Drug Policy Foundation. Rolles says the Russian government has been a relentless critic of cannabis legalization. He noted “the extraordinary hypocrisy of a Russian actor such as Abramovich with close political associations to Putin, investing in and profiting from cannabis industries—given the Russian state’s hawkish Drug War posturing on cannabis legalization.”


Abramovich didn’t respond to queries from Barron’s, but he has previously denied allegations that he is close to Putin or that he has done anything to merit sanction. When the U.K. sanctioned Abramovich last year, it accused him of having “clear connections” to Putin’s regime and cited Abramovich’s role in a secret deal that enriched a top Putin aide by $119 million (a deal previously reported by Barron’s). 


Abramovich didn’t comment then, while the Putin aide said that the transaction had been properly disclosed.


Cetus was formed as an investment vehicle by trustees of Abramovich in 2010. In internal communications, Meritservus employees referred to the owner of multiple shell companies like Cetus as “Mr. Blue.” Blue is the Chelsea team’s primary color. But in anti-money-laundering disclosures required by Cetus’ bankers, letters from Meritservus confirm that behind two layers of trusts, the “ultimate beneficial owner” of Cetus was Abramovich.


The oligarch had a long acquaintance with Jordan and Blokh. The U.S.-born Jordan was one of the go-to bankers in Russia’s transition to capitalism and during the subsequent battles for prize corporate assets. Blokh, also a U.S. citizen, ran Abramovich’s oil company, Sibneft, then used the billionaire’s backing to consolidate Russia’s dairy industry and sell the resulting company to Danone BN –0.46%  (DANOY) in 2010.


Jordan first invested in the vaping company that would become Curaleaf in 2011, according to a Jordan investment presentation. Four years later, he took control of the company and, in 2016, brought in Abramovich, Cetus records show. Through Cetus, Abramovich extended Curaleaf a bridge loan and bought 21% of its stock, according to a deal in which representatives of Jordan and Abramovich agreed to add a director of Abramovich’s choosing. December 2016 agreements gave Abramovich’s Cetus veto power over Curaleaf deals and acquisitions, then transferred that power to Blokh.


Curaleaf says that Abramovich never had any influence or decision-making role and has cut ties. “Mr. Abramovich is no longer a creditor to, or investor in, Curaleaf,” said the company in a statement, “and the loans he provided to its founding shareholders to invest in the company have been repaid for several years.”


“Curaleaf was one of thousands of companies globally and in the U.S. that were beneficiaries of Mr. Abramovich’s financing,” Curaleaf’s statement continued, At the time he was a much sought-after investor and a well-recognized businessman around the world. He remains unsanctioned in the United States.”


In December 2016, Cetus records show that it lent Blokh $50 million to buy stock in Curaleaf. Blokh’s borrowings for Curaleaf shares grew to $60 million the next year, and Cetus also lent $24 million to Boris Jordan to buy stock in the cannabis company. Curaleaf shares secured another $95 million that Jordan borrowed from Cetus. By the time Curaleaf came public in October 2018, its main source of funding was an $85 million loan from Cetus. Blokh didn’t respond to questions from Barron’s.

Curaleaf didn’t mention Abramovich’s name in filings for its October 2018 initial public offering, or the securities filings that followed.


Well before Russia’s full-scale invasion of Ukraine, the oligarch was controversial because of his alleged connections to Putin, says Justyna Gudzowska, a former attorney with the U.S. Treasury’s Office of Foreign Assets Control, who now works at The Sentry—a nonprofit that uncovers funds derived from war crimes. In 2018—she notes—his U.K. visa wasn’t renewed and the billionaire settled a case over unpaid debt filed in Switzerland by the European Bank for Reconstruction and Development on confidential terms. Abramovich publicly denied wrongdoing at the time. Switzerland refused him a residence visa, citing risks of money laundering and public safety, which Abramovich disputed.

“If you did a quick Google search there was plenty of so-called negative news,” says Gudzowska, “How did they get comfortable with his money?”


Abramovich didn’t confine his funding of American cannabis to Curaleaf. Cetus records show when Jordan started a cannabis venture fund called Measure 8 in 2017, Abramovich supplied the majority of its $54 million in initial capital. A year later, an investment presentation by Jordan boasted that Measure 8 partners had reaped a 483% return.


Cetus financials show that Abramovich also committed $10 million to be an early partner in Tuatara Capital, a New York-based fund that backed more than a dozen cannabis companies and sponsored a cannabis-focused special-purpose acquisition company, during the 2021 SPAC bubble. The SPAC merged last year into the marijuana marketing company SpringBig Holdings (SBIG). SpringBig said it wasn’t aware of an Abramovich investment in Tuatara, and Tuatara didn’t respond to requests for comment.


By the end of 2018, the Cetus balance sheet showed it had invested $130 million across the industry, with another $194 million in loans. Among its shareholdings: California weed delivery service Eaze Solutions; Toke.TV webcast producer Greenrush Media; a dispensary software vendor, Flowhub; CBD brand Green Gorilla; and publicly held vape maker Tilt Holdings (TLLTF). Legal agreements at MeritServus show that all these investments were directly negotiated private placements. Tilt says executives who brought in the Abramovich investment are no longer working there. Eaze says it wasn’t aware that Abramovich owned Cetus.


Until Russia’s invasion of Ukraine, the oligarch remained the anchor lender in Curaleaf’s debt deals. Records from MeritServus show the oligarch was owner of a British Virgin Islands company called Meliastove that lent Curaleaf $60 million in December 2021. Curaleaf says it is still indebted to Meliastove, but that it has been assured that Abramovich no longer owns it.


In the time leading up to the war, MeritServus files show that Cetus sold $8 million of its Curaleaf shares to the wife of a top official of the state-owned Russian Railways. Then on Feb. 25, 2022—the day after Russia invaded Ukraine—Abramovich told his UBS bankers that he was making his children beneficiaries of the trust that owned Cetus, according to a UBS document.

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