Roman Abramovich, a Russian oligarch, backed start-ups that won contracts from the US government

According to records that have been leaked, Abramovich invested in seven businesses that won government contracts in the UK and the US. At least one of the investors was unaware that Abramovich had contributed, highlighting the difficulties cash-strapped firms encounter in figuring out who is truly supporting them.

The cofounders of Sunnyvale, California-based Kiana Analytics, a startup providing real-time location services, were seeking investors in July 2017. Convertible notes, a sort of debt that may be converted into equity, were the type of financing the company was looking for in its early stages.

One of the investors was the mysterious British Virgin Islands-based company Innes Worldwide Holdings, which contributed $140,000 to the business. The founders of Kiana were unaware that Roman Abramovich, a Russian businessman, eventually controlled Innes.

One of the cofounders of Kiana, Sebastian Andreatta, tells Forbes, “We had no notion that’s who it was. Nader Fathi, the company’s CEO, adds: “We never met [Abramovich], and we had no idea that he was the owner of this fund.”

Leaked documents from an offshore service provider with a Cyprus address reveal the previously undisclosed transaction. These documents were provided to the Organised Crime and Corruption Reporting Project (OCCRP) and its partners, including Forbes, in an anonymous manner. The U.S. Department of Homeland Security (DHS) awarded Kiana a $200,000 grant seven months after that initial investment to create technology for Customs and Border Protection, the organisation in charge of overseeing U.S. ports of entry.

Kiana is not special. It’s one of several previously unreported investments that Abramovich made over the past 20 years in dozens of businesses around the West. He made at least $22 million in investments from 2013 to 2019 in seven companies that later won government contracts in the United States and the United Kingdom. For someone with an estimated net worth of $9.2 billion, this is a pittance. Abramovich’s attorneys did not respond to Forbes’ in-depth inquiries.

The fact that the investors in Kiana were unknown to the company’s founders illustrates how challenging it may be for small, cash-strapped firms to figure out who is funding them. Abramovich made his investment through a British Virgin Islands-based offshore company, where it is not necessary for businesses to reveal their beneficial owners to the public. The records that were released, which show that Abramovich owned Innes Worldwide through the Proteus Trust, a trust with its headquarters in Cyprus, are how Forbes learned about Abramovich’s ownership. According to a January story by The Guardian, Abramovich gave his seven children a 51% ownership stake in Proteus on February 24, 2022—the day Russian soldiers invaded Ukraine—along with many other trusts.

But it’s unlikely that Kiana would have had the time, resources, or even knowledge to acquire such data. Andreatta continues, “Perhaps there should be some kind of legislation requiring funds to disclose who their investors are, because it’s legitimate to ask that.”

Startups are not required to disclose the identity of the investors in them by law in the United States. The federal government didn’t even compel local or foreign businesses to disclose their ultimate beneficial owners until recently. That’s about to alter: The Financial Crimes Enforcement Network (FinCEN) of the Treasury Department passed a rule in September that will take effect on January 1, 2024, and which for the first time would require companies to disclose the identities of persons who hold or control at least 25% of their shares. The new regulation will require foreign businesses that are “registered to do business in any state or tribal jurisdiction” to comply. Beneficial ownership data will be provided to federal, state, and local governments, financial institutions, and law enforcement agencies, but not to the general public.

Even still, it would seem that a corporation accepting finance from a foreign firm, as was the situation with Kiana, would not have access to ownership information. It’s common for businesses to be unaware of the source of the funding they’re receiving, especially during investment rounds where VC firms and funds may aggregate resources from a variety of investors.

The new regulation will require foreign businesses that are “registered to do business in any state or tribal jurisdiction” to comply. Beneficial ownership data will be provided to federal, state, and local governments, financial institutions, and law enforcement agencies, but not to the general public.

Even still, it would seem that a corporation accepting finance from a foreign firm, as was the situation with Kiana, would not have access to ownership information. It’s common for businesses to be unaware of the source of the funding they’re receiving, especially during investment rounds where VC firms and funds may aggregate resources from a variety of investors.

Innes Worldwide paid $144,330 to Moscow-based venture capital fund Impulse VC for services including “searching for promising deals” and “conducting transactions” in the second quarter of 2017. The documents in Kiana’s case reveal that Innes Worldwide’s investment was organised by Impulse VC. Innes was given with ten possible deals by Impulse, three of which led to an investment, including Kiana. On its website, Impulse apparently erased all references to Abramovich in late March 2022, not long after he had been punished. An inquiry for comment was not answered by an Impulse representative.

We constantly search for funding, just like many other entrepreneurs. Private investors and funds are both options, according to Andreatta. And because they typically have someone in charge of the funds, we just don’t know who they are in those situations. We frequently have no idea who those end investors are.

Forbes discovered six additional companies supported indirectly by Abramovich that were awarded government contracts in the West in addition to Kiana. Together, these businesses received $65 million in contracts in the US and the UK as a result of his investment; $9 million came after Abramovich’s assets were blocked and he was sanctioned by the UK and the EU in March 2022. (Contrary to its partners in the West, the US has not sanctioned Abramovich.)

Requests for comment from five of the seven companies received no response.

And because they typically have someone in charge of the funds, we just don’t know who they are in those situations. We frequently have no idea who those end investors are.

Forbes discovered six additional companies supported indirectly by Abramovich that were awarded government contracts in the West in addition to Kiana. Together, these businesses received $65 million in contracts in the US and the UK as a result of his investment; $9 million came after Abramovich’s assets were blocked and he was sanctioned by the UK and the EU in March 2022. (Contrary to its partners in the West, the US has not sanctioned Abramovich.)

Requests for comment from five of the seven companies received no response. Through a contract with the U.K. Medical Research Council, a department of the British government that carries out medical research, Insphero got about $49,000 in July of last year. Abramovich has also received approval from Switzerland.

A request for comment from Insphero was ignored. A Medical Research Council representative told Forbes that the organisation “complies with all government guidance on procurement procedures” and had performed 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.”

Insphero received little state funding, but other Abramovich-backed businesses did.

Since Abramovich invested in 2019 in Cellphire Therapeutics, a Maryland-based biotech company that is creating cellular therapies from platelets—cell-sized fragments that form clots to stop bleeding—the Department of the Army and the Department of Health and Human Services have awarded the company nearly $55 million in federal contracts. This includes the roughly $7 million that arrived after Abramovich was hit with EU and UK sanctions.

According to Cellphire’s CEO Mike Gaffney, the company has never spoken to, written with, or met Mr. Abramovich. “There are numerous shareholders. There are no privileged access or information arrangements; all common shareholders receive regular shareholder communications.

In contrast to the UK and the EU, the US has not yet placed penalties on Abramovich. The Department of Justice acquired a warrant to confiscate two of his private jets in June due to their flights into and out of Russia, a breach of export restrictions and American sanctions against Putin’s government. This was the sole action the U.S. government has officially taken against him. Anders Slund, a Swedish economist and authority on Russian billionaires, believes that Abramovich has probably escaped punishment because of his function as a back channel between Ukrainian president Volodymyr Zelensky and Vladimir Putin. “For Zelensky, Abramovich is the only person who has a direct line to Putin,” the author claims. They are concerned about losing him.

Abramovich’s investments in the businesses that won federal government contracts don’t seem to cause any legal problems for the businesses because he isn’t prohibited in the U.S. A former senior U.S. sanctions official tells Forbes that it is more of a commercial and reputational risk for these companies. I don’t believe there is a [legal] problem, especially if they weren’t concealing anything and if they weren’t aware that Abramovich had invested.

That doesn’t necessarily imply that Abramovich is a low-risk investor in these businesses. Viktor Winkler, a sanctions attorney and former head of global sanctions standards at German bank Commerzbank, believes that although “[Abramovich] isn’t sanctioned, a person with his political and economic connections is very, very likely to be close to sanctioned entities.” “This is a huge problem for any globally operating enterprise on this planet. You face a very big risk by taking the investment when you enable an investor like this.

These dangers include the possibility that banks and other providers won’t cooperate with them because of Abramovich’s involvement, even if he isn’t directly subject to American penalties. It also raises the issue of what these businesses ought to have done in the wake of Abramovich’s punishment or when they initially learned that he had backed them.

“What the startup does once it learns seems to matter more in these situations. Yasuda of UC Davis asks, “Will it return the money or ask other investors to buy out Abramovich’s stake?”As a condition of winning government contracts in the future, the US and UK governments may demand that startups conduct background checks on the ultimate owners of all current investors (including offshore corporations). As geopolitical friction between the West and authoritarian governments increases, this type of process may become more commonplace.

Abramovich had not yet received any official approval when he initially invested in Kiana and the other nine businesses. He would have been a desirable investor for any firm looking for investment thanks to his billions. Co-founder Andreatta of Kiana continues, “Had I known that this guy was a billionaire investor, we probably would have tried to push harder for more money.”