Roman Abramovich.
Getty ImagesLeaked documents reveal that Abramovich invested in seven companies that received government contracts in the U.S. and the U.K. At least one didn’t even know that Abramovich had invested, pointing to the issues cash-strapped startups face in identifying who is really backing them.
In July 2017, the cofounders of Kiana Analytics, a real-time location services startup based in Sunnyvale, California, were looking for investors. The firm was seeking early-stage funding, pitching convertible notes—a type of debt that converts to equity—to potential investors.
One of the investors was Innes Worldwide Holdings, an obscure firm based in the offshore tax haven of the British Virgin Islands, which put $140,000 into the company. What Kiana’s founders didn’t know at the time was that Innes was ultimately controlled by Russian oligarch Roman Abramovich.
"We had no idea that's who it was," Sebastian Andreatta, one of Kiana’s cofounders, tells Forbes. Adds Nader Fathi, the firm’s CEO: “We never met [Abramovich], we didn't know this fund belonged to him."
The previously unreported transaction appears in leaked documents from a Cyprus-based offshore service provider that were shared anonymously with the Organized Crime and Corruption Reporting Project (OCCRP) and its partners, including Forbes. Seven months after that investment, Kiana received a $200,000 grant from the U.S. Department of Homeland Security (DHS) to develop technology for Customs and Border Protection, the agency that manages ports of entry into the U.S.
Kiana isn’t unique. It’s one of several previously unreported investments that Abramovich made in dozens of companies throughout the West over the past two decades. From 2013 to 2019, he invested at least $22 million in seven firms that later received government contracts in the U.S. and the United Kingdom—a drop in the bucket for someone with an estimated net worth of $9.2 billion. Lawyers for Abramovich did not respond to detailed questions from Forbes.
The fact that Kiana’s founders had no idea who was behind the investment points to how difficult it can be for small, cash-strapped startups to identify who is behind the vehicles and funds that back them. Abramovich invested through an offshore firm based in the British Virgin Islands, which does not require companies to publicly disclose their beneficial ownership. Forbes learned of Abramovich’s ownership through the leaked documents, which reveal that Abramovich owned Innes Worldwide through the Proteus Trust, a trust based in Cyprus. The Guardian reported in January that Abramovich transferred a 51% stake in Proteus, as well as several other trusts, to his seven children on February 24, 2022—the day Russian forces invaded Ukraine.
But Kiana likely wouldn’t have had the time, resources or even the ability to access that information. "Maybe there should be some sort of legislation that funds have to disclose who their investors are, because it's legitimate to ask that," adds Andreatta.
There are no regulations in place in the U.S. that require startups to know who is behind the funds investing in them. Until recently, the federal government didn’t even require domestic or foreign companies to reveal their ultimate beneficial owners. That’s set to change: Last September, The Treasury Department's Financial Crimes Enforcement Network (FinCEN) approved a rule—coming into effect starting January 1, 2024—that for the first time will require companies to disclose the identity of individuals who own or control at least 25% of their shares. Foreign companies that are "registered to do business in any state or tribal jurisdiction" must also follow the new rule, which will provide beneficial ownership information to national security, intelligence and law enforcement agencies as well as financial institutions and state and local governments—but not to the public.
Still, it appears that ownership information would not be accessible to a firm that is accepting funding from a foreign company, as was the case with Kiana. It’s not unusual for startups to be in the dark about where the money they’re raising is coming from, especially in funding rounds where VC firms and funds may pool resources from a number of investors. According to Ayako Yasuda, a professor of finance at the University of California, Davis' Graduate School of Management, startups often rely on the lead venture capital investors in a funding round to conduct due diligence on potential co-investors.
“If the financing round is syndicated, then the lead investor VC is the main point of contact for the startup,” says Yasuda. “A scenario where a startup receives funding from a well-known VC, which then invites Innes Worldwide to co-invest along with it, and the startup does not realize that a sanctioned Russian individual is behind Innes Worldwide, seems quite plausible.”
In Kiana’s case, the documents show that Innes Worldwide’s investment was organized by Impulse VC, a Moscow-based venture capital fund that billed Innes $144,330 for its services—including "searching for promising deals" and "conducting transactions”—in the second quarter of 2017. Impulse presented Innes with 10 potential deals, three of which ultimately resulted in an investment, including Kiana. Impulse reportedly removed all mentions of Abramovich on its website in late March 2022, shortly after he was sanctioned. A representative for Impulse did not respond to a request for comment.
"Like many other startups, we're always looking for funding. There are private investors, and then there's also funds,” says Andreatta. “And in those cases, we just don't know who they are, because they usually have somebody in charge of the funds. Most of the time, we never know who those end investors are."
Besides Kiana, Forbes found six more companies backed indirectly by Abramovich that received government contracts in the West. Collectively, these firms obtained $65 million in contracts in the U.S. and U.K. after he invested; $9 million came after Abramovich was sanctioned by the U.K. and the European Union in March 2022 and his assets were frozen. (Unlike its Western allies, the U.S. hasn’t sanctioned Abramovich.)
Five of the seven companies did not respond to requests for comment. Abramovich made the investments through three firms he owned at the time: Innes Worldwide, Cyprus-based Ervington Investments and Norma Investments, registered in the British Virgin Islands. (Norma and Ervington were both transferred to one of his associates, David Davidovich, after the invasion; the U.K. sanctioned Davidovich in April 2022.)
Abramovich owned small stakes in most of these firms and he wasn’t sanctioned at the time he made the investments. But one company that continued to receive government contracts in the U.K.—even after he was hit with sanctions in March 2022—was Switzerland-based biotech outfit Insphero, where Abramovich was a significant shareholder, having acquired a 14.4% stake in 2015. Last July, Insphero received roughly $49,000 through a contract from the U.K. Medical Research Council, a British government body that conducts medical research. (Switzerland has also sanctioned Abramovich.)
Insphero didn’t respond to a request for comment. A spokesperson for the Medical Research Council told Forbes that the organization “complies with all government guidance on procurement procedures” and had conducted a “comprehensive review of all current grant-funded projects and related collaborations with Russian-based partners and institutions” to “ensure no research contravenes U.K. government sanctions.”
While Insphero didn’t receive much public funding, other Abramovich-backed companies did. Cellphire Therapeutics, a Maryland-based biotech firm that’s developing cellular therapies from platelets—cell-sized fragments that form clots to stop bleeding—received nearly $55 million in federal contracts from the Department of the Army and the Department of Health and Human Services since Abramovich invested in 2019. That includes some $7 million that came after Abramovich was sanctioned by the EU and U.K.
“The company has never met, corresponded, or spoken with Mr. Abramovich,” Cellphire’s CEO Mike Gaffney tells Forbes. “Our shareholders are numerous. All common shareholders receive regular shareholder communications and do not receive preferential access or information.”
Unlike the U.K. and the EU, the U.S. still hasn’t imposed sanctions on Abramovich. The only action the U.S. government has publicly taken against him occurred last June, when the Department of Justice obtained a warrant to seize two of his private jets because of their flights into and out of Russia, a violation of export controls and U.S. sanctions on Putin’s regime. Abramovich likely hasn’t been personally sanctioned because of his role as a back-channel between Ukrainian president Volodymyr Zelensky and Vladimir Putin, according to Anders Åslund, a Swedish economist and expert on Russian oligarchs. "For Zelensky, Abramovich is the only person who has a direct line to Putin,” he says. “They don't want to lose him.”
Since Abramovich isn’t sanctioned in the U.S., his investments in the companies that received federal government contracts don’t appear to raise any legal issues for the firms. "It's more a commercial, reputational risk for these companies than anything else,” a former senior U.S. sanctions official tells Forbes. “Especially if they weren't hiding anything, if they didn't know [that Abramovich had invested] then I don't think there's a [legal] issue."
That doesn’t mean that Abramovich is a risk-free investor for these companies. "Although [Abramovich] isn't sanctioned, a person with his political and economic connections is very, very likely to be close to sanctioned entities,” says Viktor Winkler, a sanctions lawyer and former head of global sanctions standards at German bank Commerzbank. “This is a huge problem for any globally operating enterprise on this planet. When you allow an investor like this, you're running a very high risk by accepting the investment.”
Those risks include banks and service providers refusing to work with them due to Abramovich’s involvement, even if he isn’t under direct U.S. sanctions. It also poses the question of what these startups should have done after Abramovich was sanctioned, or when they first discovered that he had invested in them.
“What seems more important in these cases is what the startup does once it finds out. Will it return the capital, or ask other investors to buy out Abramovich's stake?” says Yasuda of UC Davis. “Going forward, US and UK governments could require startups to run background checks on ultimate owners of all existing investors (including offshore entities) as a pre-condition of receiving government contracts. This type of procedure might become more routine as geopolitical tension rises between the West and authoritarian regimes.”
When he first invested in Kiana and the other nine companies, Abramovich hadn’t been sanctioned anywhere. His billions would have made him an attractive investor for any startup seeking funding. Adds Kiana cofounder Andreatta: "Had I known that this guy was a billionaire investor, we probably would have tried to push harder for more money.”
