Their Russian investor was dead.
On a late Tuesday night in early May, the billionaire Russian coal tycoon, Dmitry “Dima” Bosov stopped answering phone calls and messages. When his wife, Katerina, arrived at their mansion in the suburbs of Moscow, she found her 52-year old husband locked in the family’s home gym, dead from an apparent gunshot wound to the head.
The owner of multiple Russian coal companies had a penchant for ice hockey, snowboarding and placing big bets on businesses. More than 6,000 miles to the west, Bosov had been trying to build a new foothold in cannabis.
The Genius Fund was run by Ari Stiegler and Gabriel Borden, two twenty-something friends who had lofty ambitions of dominating the cannabis market first in the U.S. and then internationally, with a roughly $164 million bet from Bosov.
Their idea was to create a vertically integrated company that owns its own supply chain, producing, distributing and selling cannabis products more efficiently. It’s a model that has proven particularly effective for other cannabis companies like MedMen, Caliva and Natura, which have raised millions in investor funding.
Genius Fund, however, blew the money in less than two years. Company executives ran up five-figure tabs, built lavish offices and manufacturing facilities, hired armed security in their pursuit to build a cannabis empire, an investigation by dot.LA found. In the end, the Russian-funded venture crumbled.
Stiegler and Borden publicly referred to Genius Fund as a private equity fund, but the company functioned more like a family office for their high wealth investor, or a conglomerate that rolled up into one parent entity. They headquartered Genius Fund originally in Venice, California, and later, Culver City.
Genius Fund’s expansive structure included more than 50 corporate entities, mostly limited liability companies, spread across farming operations, CBD and THC manufacturing processes, product development, delivery operations and a retail front, according to domestic and international corporate filings. Each of Genius Fund’s main operational entities had its own CEO or general manager.
At its peak, the overall business employed more than 300 employees and contractors, corporate records showed.
Genius Fund was one of dozens of new marijuana-related startups that have sprouted up in recent years after California legalized recreational marijuana. Like others chasing the “green rush,” Genius Fund wanted to position itself as an early giant in California’s marijuana market, which is the world’s largest legal pot market, according to 2019 industry reports. It’s an industry that has generated nearly $3.1 billion in spending in the Golden State alone.
The company was beset with problems, according to former employees from all levels and areas of the organization who agreed to speak to dot.LA on condition that they not be named in the story out of fear of reprisals.
“Not one person at the top knew what they were doing,” said a former employee — a sentiment that was echoed by many of their former colleagues and repeated by the company’s now ex-CEO in his more than $3.5 million lawsuit against the company and its Russian oligarch owner filed in April in the U.S. District Court for the Central District of California in Los Angeles.
Ari Stiegler and Gabriel Borden first met while in college. They reconnected in early 2018 at a crypto-scene party that Borden threw in his family’s Santa Monica, California, home. It was kismet in a way.
Business associates described Borden, now 26, as a shy, trusting and empathetic guy. The son of the executive producer and creator of Disney’s “High School Musical,” Borden had access to his father’s Rolodex, according to his associates. Stiegler, now 28, was described by associates as brash and cocky, someone who knew how to talk a big game and sell investors on a vision, even if he may have known little about the industry.
Both were young serial entrepreneurs working out of the heart of Silicon Beach.
Early in their relationship, Stiegler arranged for Borden to be made an advisor for a cryptocurrency exchange company, then called Samsa Technologies Inc., which Stiegler co-founded in 2017 with another friend. Stiegler already had a history of jumping quickly from one business venture to another in search of hitting it big, according to former investors and business partners.
Stiegler spent office hours planning his own side businesses or watching YouTube videos, a former investor in one of Stiegler’s earlier ventures, Rob Sciama, said.
Borden was good at nurturing relationships and bringing people to the table. He had always been attracted to business and not afraid of reaching out to industry leaders, including major business executives and VPs, while at Loyola Marymount University. While in school, he helped get InterWallet off the ground. That company would become Van Nuys-based Maya Labs, which provides a self-service kiosk payment solution for the unbanked and underbanked.
Several months after their first meeting, they met with a possible Russian investor, Dmitry Borisovich Bosov, a contact of one of Borden’s classmates at Loyola Marymount, to talk about a possible investment opportunity.
Stiegler said in an interview that Bosov wanted “good entrepreneurs in L.A. to run a cannabis company” for him.
“He really liked us and basically said, ‘Hey, you guys need to quit your companies and come work for me,’” Stiegler told dot.LA. “It’s not every day that someone offers to invest millions of dollars into a company. So we were like, ‘OK, yeah, sure we can do this right now’.”
Stiegler’s colleague, Borden, did not reply to multiple requests for comment.
The new opportunity came with the promise of $160 million investment for the cannabis business even though neither he nor Borden had any experience in the industry, according to two people with knowledge of the meeting.
With the promise of millions and a hefty chunk to start, the company called Genius Fund was underway.
Published: August 05, 2020
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