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A lawsuit was filed on February 16, 2024, against California businessmen Ari Stiegler and Gabriel Borden for misusing the money intended for a cannabis operation. The company was named the Genius Fund and $145 million was entirely funded by Alltech Investments Limited, a limited liability company owned by the now-deceased Russian national Dimitry Bosov.

Mikhail Abyzov is a former Russian cabinet member and friend of Bosov. His son, Danny Abyzov, attended Loyola Marymount University when Borden was also a student at the university. Danny Abyzov made the introduction of the men to Bosov.

According to the court complaint, Bosov agreed to invest in a fund run by Stiegler and Borden because they promised Bosov that they would develop a profitable 100-acre cannabis cultivation operation within one year. Stiegler and Borden each had starting salaries of $10,000 a month for the first month, and then received $250,000 a year each in salary for their roles as co-CEOs.

An attorney for the businessmen, Patrick M. Maloney of the Maloney Firm APC,  told Law360 that the lawsuit presented a “one-sided and incomplete portrayal” of his clients’ time as executives of the cannabis company in question, Genius Fund.

“This is a meritless suit that desperately attempts to ignore a clear and simple fact: Messrs. Borden and Stiegler faithfully followed the directives from the investor who funded and oversaw the management of the company,” Maloney said in a statement to Law360. “This suit was filed more than three years after the plaintiff participated in an assignment for the benefit of creditors. That initial suit lacked merit, and as a result, the plaintiff has already dropped six causes of action. Messrs. Borden and Stiegler intend to vigorously defend themselves against these ridiculous claims.”

Cannabis plans

The two CEOs had told the Fund that it would have a cannabis operation within 12 months. To meet the timeline, they invested in an operation called Plumas Farms, which turned out to not have a cannabis license. The complaint also states that the two had no farming experience and hired friends for college who also had no cannabis cultivation experience. They are accused of spending $7 million on salaries and attempting to call the property a research facility to avoid the licensing requirement.

They are also accused of spending $500,000 on bribes to the Plumas Farmer’s Board and ultimately that investment lost $6 million, although $1 million was carved back on the sale of equipment.

They also are alleged to have spent $4.5 million on a Humboldt farm operation that resulted in a $4 million loss.

The two also are accused of hiring a former professor to run an extraction operation. The complaint states that David French, a former Loyola professor, spent $6.5 million on a building and then another $10 million for a machine from China. He was unable to assemble it himself and paid for Chinese workers to assemble the machine. The complaint claims that the machine was never operational, yet money continued to be sent to French with no accounting of the use of the money.

Lavish spending

The complaint alleges that the two immediately after the Fund was established began to spend lavishly and burned through $17 million in just two years. For example, they are said to have awarded themselves new Teslas despite the company having no income. They also gave themselves bonuses and bought jet skis and a dog. They also took the company’s employees on a two-week trip to Cabo San Lucas in Mexico and encouraged them to drink and overspend.

The two CEOs were also accused of signing a lease for expensive office space, which wasn’t needed since the company was just getting started. They agreed to a million a year on rent and then proceeded to renovate the office space which cost additional millions of dollars.

The duo are also accused of not hiring accountants and creating numerous sub-entities to hide their incompetence. One was called Spotlight and this was the company that did most of the business for the Genius Fund. It was Spotlight that signed the office lease.

The complaint also alleges that the two spent $23 million on a California property that the Genius Fund economist told them was only worth $8 million. The property was also impacted by the endangered Tiger Salamander. This deal seemed to be the final straw for the Genius Fund. The complaint says the two were terminated as a result of the bad deal.

The court document stated:

But it was too late. The company was already effectively insolvent, with significant debt owed to various vendors, landlords, and others. In March 2020, unable to make payroll, all but a handful of Genius Fund’s (and its subsidiaries’) 150+ employees were terminated.

Russian connections

According to numerous news reports in May 2020, Dmitry Bosov was found dead at his home in a Moscow suburb, in what officials say was a suicide. The Investigative Committee announced on May 7 that Bosov, 52, had died the previous evening of a gunshot wound to the head. The Alltek group controlled the coal producers Siberian Anthracite, VostokUgol, and other firms. Bosov was a billionaire and the 86th richest man in the country.

According to Reuters, in December 2023 a Russian court sentenced Mikhail Abyzov to 12 years in jail, finding him guilty of fraud and organizing a criminal group. Reuters noted that Abyzov “was once an ally of former President Dmitry Medvedev and held the title of minister for open government affairs from 2012 to 2018. He was taken into custody in March 2019.”

In 2020, a U.S. Army Special Forces veteran filed suit against Bosov, saying he was owed more than $1 million for his work on a cannabis venture. Francis J. Racioppi Jr. was ultimately named CEO of the company but says he was squeezed out by the two businessmen. That case is being fought against the Bosov estate, which claims the arbitration agreement he assigned when he joined the company in a lower-level capacity remained in effect even as he became the CEO. Racioppi claims the arbitration agreement only related to the initial job.

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