Leonard Tannenbaum’s newest venture was supposed to be a sure thing. In 2020, after selling his previous company, Fifth Street, under a cloud of investor litigation and an SEC settlement, the veteran financier recast himself as a pioneering lender to underbanked cannabis firms. Weed was booming as Americans sat out the pandemic stressed and bored. But marijuana was illegal at the federal level, leaving most pot operations shut out of traditional banking.
Tannenbaum had the perfect Wall Street pitch: Become the dominant institutional lender to the fast-growing $19 billion industry by offering high yields to stock investors.
In early 2021, Tannenbaum and his third wife, Robyn, took their West Palm Beach, Florida–based AFC Gamma (later renamed Advanced Flower Capital) public as a mortgage REIT on the Nasdaq, raising $124 million. Within two years, thanks to successive stock offerings, AFC’s equity value rose to nearly $400 million, as did its loan book.
“What amazed me was there was no institutional lender in the space, no reputable lender,” said Tannenbaum on the From Pot to Popular podcast in 2022, part of a media blitz coordinated with his entrance into the sector. “This was a chance to be number one in the industry.”
Five years later, Tannenbaum’s weed financing venture has gone up in smoke. Last year, Advanced Flower Capital suffered losses of $21 million on net revenue of $25 million; its market value has dropped to less than $70 million. Its quarterly dividend, which offered double-digit annual yields, has been cut from 56 cents per share to 5 cents. Even worse, its largest borrower, Chicago-based weed cultivator and seller Justice Grown, has defaulted, and the two sides are now locked in a legal war involving allegations of fraud, defamation and corporate sabotage. Another big borrower, Arizona-based Devi Holdings, a multistate marijuana merchant, has ended up in receivership after operational failures and unpaid taxes.
But despite the losses and litigation, Tannenbaum is doing just fine. Between dividends and management fees, he and his investment management company have earned more than $80 million since AFC’s inception. In 2024, AFC spun out its non-cannabis real estate loans into a separate investment vehicle, and now it appears Tannenbaum is pivoting away from marijuana. (He refused multiple requests to be interviewed for this story.)
Tannenbaum operates in the murky world of business development companies (BDCs), which are publicly traded private-credit funds that lend to small and midsize companies. Like REITs, they are required to distribute 90% of their income to shareholders as dividends. Their stocks are sought after by yield-hungry retail investors. Those who have tracked Tannenbaum over his career are accustomed to the ugly financial dramas that seem to follow him. One thing is clear: The 54-year-old dealmaker is a master at enriching himself while his shareholders lose out. Forbes estimates that since 2008, Tannenbaum and entities he controls have earned more than $670 million in fees, dividends and IPO proceeds from his five public businesses, and he has accumulated a net worth in excess of $800 million. His companies, meanwhile, have shed roughly $1.2 billion in market value (see table below).
“Performance figures for each entity are largely dependent on different industry and market factors as well as the specific investment time frame,” said a spokesperson for Tannenbaum, adding that Fifth Street Finance, Tannenbaum’s largest BDC, returned a total of 8% between its 2008 IPO and October 2017, when distressed-asset investor Oaktree purchased its advisory rights. Over that same period (during which the S&P 500 provided a 130% total return, or 16 times what Fifth Street Finance did), that BDC paid Tannenbaum’s advisor $457 million in management and incentive fees.
“Tannenbaum was out to make himself rich,” recalls William Craig, Fifth Street’s CFO from 2007 until 2011, when Tannenbaum fired him. “He wanted to become a billionaire before he was 40. He made no bones about that.”
Born in 1971, Tannenbaum was raised in the affluent New York City suburb of Great Neck on Long Island’s North Shore. His father was managing partner of a small law firm; his mother, a Cuban immigrant, was an administrator for the local school district. After receiving his BS and MBA from Wharton and working at a few Wall Street firms, including Merrill Lynch, in 1997 Tannenbaum married Elizabeth Toll, daughter of the cofounder of luxury homebuilder Toll Brothers.
Tannenbaum’s new father-in-law, Bruce Toll, was his first big backer. In 1998, he seeded Tannenbaum’s first hedge fund. Under the original arrangement, Toll would keep 90% of the profits and Tannenbaum, as manager, would receive 10%. “Some guys can really sell themselves, and he’s a good talker,” says Toll, now 83. “A good convincer of ideas.”
Toll’s financial support, which ultimately grew to over $100 million, fueled Tannenbaum’s start, but cozying up to hedge fund manager David Einhorn—whom he met in 1998 over a common investment in the Einstein Noah Bagels chain—changed the game for Tannenbaum. The Greenlight Capital founder became a poker pal, introducing Tannenbaum to the world of business development companies and the fine art of using other people’s money to get rich.
One lesson: Structure mattered. In an externally managed BDC, the public company owns the loans, but the outside manager earns recurring fees, which in Tannenbaum’s case were structured like a hedge fund at 2% of assets and 20% of profits. This creates a powerful incentive to increase assets, even shoddy ones. The shareholders take the market risk, while the manager collects recurring fees even if the stock falls and loans sour.
In 2004, when he was 32, Tannenbaum launched a second fund with a $20 million investment from Toll—but this time with no profit-sharing agreement and a new investment management company through which Tannenbaum could collect fees. When he debuted a third fund three years later, Toll invested $25 million and guaranteed a $50 million line of credit, while also guaranteeing $15 million in personal loans for Tannenbaum. When some of those loans came due, Toll alleged in a later lawsuit, Tannenbaum persuaded his father-in-law to guarantee a new loan in exchange for Tannenbaum’s verbal agreement to split his fund’s profits with Elizabeth. Tannenbaum denies this agreement ever existed, but whatever the case, he converted his third fund into a BDC called Fifth Street Finance and took it public in June 2008, raising $141 million, including a $30 million investment from his hedge fund pal Einhorn.
Around the same time, Tannenbaum’s marriage to Elizabeth, with whom he had three children, was unraveling, largely because he was having an affair with his former secretary Stacey Thorne, a Fifth Street employee who was six years his junior and also married at the time. Tannenbaum and Elizabeth divorced in 2010; she relinquished claims to Fifth Street profits, and her father unsuccessfully sued Tannenbaum for his share of earnings.
“He cheated on my daughter with Stacey, so my daughter divorced him,” Toll says. “She didn’t get a penny.”
With his marriage and his first benefactor fading in the rearview mirror and markets recovering from the 2008 financial crisis, Tannenbaum began to hit his stride as a BDC manager. His Fifth Street Finance, which had a $274 million investment portfolio at the time of its June 2008 IPO, tapped equity markets 14 times in the ensuing six years, raising roughly $1.4 billion from stock investors. “It was a machine, and his greatest skill was raising money,” says a former Fifth Street executive. “He could pick up the phone, call Morgan Stanley and raise $100 million of retail money [with] one phone call.”
That inflow transformed both Fifth Street and Tannenbaum. He left Armonk, New York, for Greenwich, Connecticut, buying a seven-bedroom, 11-bath mansion on a three-acre lot backing onto protected woodlands. He dabbled in politics, hosting a $1,000-per-plate political fundraiser at his estate in 2012 and launching a bipartisan PAC to support pro-business candidates. He even floated the idea of one day running for the U.S. Senate from Connecticut, telling the Wall Street Journal that he could help America become “more competitive against China.”
By 2013, Fifth Street Finance’s public market value had swelled to more than $1.4 billion. That same year, Tannenbaum married Stacey, who had become head of investor relations. By 2014, Fifth Street moved from White Plains to a 44,000-square-foot headquarters in Greenwich. It had grown from a small mezzanine lender into a nearly $6 billion credit platform with two public BDCs and private funds under the Fifth Street umbrella. Its original BDC, Fifth Street Finance, had a $2.5 billion investment portfolio. It was a lucrative fee machine: According to SEC filings, between 2008 and 2017, Tannenbaum’s investment management company collected $489 million in management and incentive fees from Fifth Street’s two BDCs. “What drove the whole thing was fees,” Craig recalls. “He just kept collecting that money.”
In 2014, Tannenbaum took his fee-reaping Fifth Street Asset Management public, selling 12% to investors in an offering in which he personally sold $88 million in stock. Einhorn became one of the firm’s largest outside investors.
But the foundation of Tannenbaum’s success was less solid than it appeared. Many of Fifth Street Finance’s early loans, including junior and second-lien loans with equity kickers issued to obscure businesses like New York specialty chemicals maker CPAC and telecom firm O’Currance of Draper, Utah, later went bad, were restructured or sold below par.
Trouble inside his BDC portfolios cast a pall on his newly public management company. Within a year Fifth Street Asset Management’s stock fell by 80% from its $17-a-share IPO price. That cost Tannenbaum’s pal Einhorn about $8 million. Small change, perhaps, for a man who was then worth nearly $2 billion, but it was an embarrassing misfire for a value investor who had made his bones exposing accounting fraud at a BDC called Allied Capital. Einhorn declined to comment; a source close to him says he “lost touch with Leonard several years ago.” Then, as Fifth Street Finance’s stock was collapsing, activist investor RiverNorth began agitating for corporate governance changes. In order to silence RiverNorth, Tannenbaum agreed to buy back 9.2 million of the BDC’s shares from the activist and related sellers for $58 million.
By 2015, another potential conflict was brewing inside Fifth Street: Tannenbaum, then 43, had become romantically involved with Robyn Friedman, a 30-year-old with investment banking experience who had joined Fifth Street a year earlier and became head of investor relations; Tannenbaum’s wife, Stacey, who had stepped down from investor relations in 2012, was on maternity leave. “I remember the general counsel calling me into the office to say ‘We have a problem,’” says a former Fifth Street executive, referring to Tannenbaum’s affair. “It was pretty obvious,” adds another former executive. “He has no issues, personally, with that type of behavior.” Says a spokesperson for Tannenbaum, “Any unconfirmed, sensationalized allegations about Mr. Tannenbaum’s personal life from years ago, or other matters that are subject to contentious and ongoing legal actions, have no bearing on his management of the investments.”
Tannenbaum moved to Miami Beach at the beginning of 2016 and filed for divorce from Stacey that May. Immediately, Stacey sought and obtained exclusive possession of their Greenwich estate for herself and their toddler son, alleging Tannenbaum had been “severely depressed, erratic and stress-creating,” coming and going without accounting for his whereabouts while “intimidating” her and creating “a toxic atmosphere in the home.” Tannenbaum later moved to have Stacey removed from the property, a request the court granted because it was his legal property and protected under a prenuptial agreement.
As he was battling his wife in divorce court, Tannenbaum was also unwinding ailing Fifth Street. In October 2017, Los Angeles distressed-asset specialist Oaktree Capital swooped in to buy two of Fifth Street’s publicly traded BDCs for pennies on the dollar, paying $320 million for more than $2 billion in loans, leaving shareholders with big losses: Fifth Street Finance’s market value had fallen from roughly $1.3 billion in 2013 to about $770 million. Its net asset value slid from $9.85 per share to about $6, and its annual dividend distributions shrank from $1.15 per share to 47 cents. As part of the sale to Oaktree, Tannenbaum moved to dissolve his publicly traded management company, Fifth Street Asset Management, after settling numerous investor lawsuits for $23 million—payments that were covered by insurance.
In 2017 Tannenbaum v. Tannenbaum likewise dissolved. Per their prenuptial agreement, Tannenbaum was required to pay Stacey $5 million, plus $12,000 a month in child support and expenses including health insurance, private school and summer camp. At the time, court documents revealed that Tannenbaum was taking home between $330,000 and $380,000 per week in after-tax income.
Finally, in December 2018, the SEC censured Fifth Street Management, ordering nearly $4 million in disgorgement, interest and penalties after finding that it misallocated $1.3 million in expenses and failed to reasonably review valuation models, leading one of its BDCs to overstate net income and issue overvalued shares. It settled the charges without admitting or denying the findings.
Like a phoenix rising from the wreckage, Tannenbaum emerged from the Fifth Street saga wealthier than ever. In 2019, he and Robyn, now his third wife, moved to Manalapan, Florida, just south of Palm Beach, spending $14 million on a seven-bedroom, 11-bath beachfront home featuring a bespoke reef aquarium. He then launched a new credit-focused firm, Tannenbaum Capital Group, to manage his and others’ money. Robyn was named partner, as well as president of both his weed-focused lending operation, Advanced Flower Capital, and his REIT, Sunrise Realty Trust. Tannenbaum’s three sons from his first marriage—a trio of Wharton grads named Stephen, Adam and Maxwell—also joined the firm.
Tannenbaum framed cannabis lending as his next big idea. The rollout came with a steady publicity campaign and launch announcements, interviews with cannabis trade publications and conference appearances. “I’m a cannabis smoker, unlike most of the people who lend to this industry,” Tannenbaum said in 2022 at the Cannabis Expo. “I understand and appreciate the product.”
He might know good weed, but his new BDC had a tough time picking good loans. Beginning in 2020 AFC lent $62.5 million to Devi Holdings, an Arizona-based operator behind Nature’s Medicines, which managed weed-growing cultivation sites and retail dispensaries across six states. Tannenbaum was so high on the business that he personally paid north of $25 million for an equity stake. Within two years, Devi had collapsed into receivership. Tannenbaum sued Devi’s founder, Jigar Patel, for allegedly failing to disclose unpaid taxes; the case was eventually settled. As of March 31, 2026, AFC still had $40.6 million of the Devi loan’s principal outstanding, which was no longer paying interest and in default.
AFC’s second-biggest loan, to Chicago-based Justice Grown, has become an even bigger nightmare. Founded in 2014, the startup was the side project of first cousins Jon Loevy and Michael Kanovitz, Ivy League–educated attorneys who run Loevy & Loevy, a prominent civil rights law firm in Chicago. They pitched Justice Grown as a social justice cannabis company, seeking to build cultivation sites and dispensaries and hiring from communities harmed by the drug war. All it needed was capital to finance the plan.
Enter AFC in 2021, which agreed to finance Justice Grown’s buildout with a credit facility that ultimately grew to around $80 million. But the business floundered as construction delays compounded, costs multiplied and regulatory approvals dragged. Justice Grown repeatedly missed interest payments, and the relationship deteriorated. The breaking point came in 2024, when Tannenbaum’s AFC pushed Justice Grown to install Tim Bossidy, a former Goldman Sachs banker and turnaround consultant, to run the New Jersey operations. According to Justice Grown, Bossidy took direction from AFC, shut out Justice’s own executives and allowed hundreds of pounds of harvested marijuana to sit unsold in a warehouse while the company’s cash position worsened.
Early last year, AFC declared to Justice Grown that it was in default and allegedly demanded that Loevy and Kanovitz fork over $10 million. When they refused, AFC swept about $1.8 million from Justice Grown bank accounts and moved to seize the company’s assets. The attorneys dashed to federal court in New Jersey, and after a hearing a judge granted preliminary relief, finding that the borrowers were not in default. AFC has appealed.
The lawsuits and counter-lawsuits quickly multiplied. In one astonishing twist, AFC also sued Loevy and Kanovitz personally in New York’s Southern District, accusing them under federal racketeering law of using Justice Grown to “line their own pockets.” AFC later stripped out the RICO claims, and a federal judge dismissed much of what remained. In February 2026, Loevy and Kanovitz fired back with a defamation suit, seeking hundreds of millions of dollars and accusing AFC executives, including Tannenbaum, of using the racketeering allegation as a reputational weapon in a bid to “extort” $10 million. Tannenbaum et al. are fighting the case.
“The loans AFC extended to the Justice Grown borrowers are past maturity and remain outstanding. AFC will enforce all its rights,” said a spokesperson for AFC. Loevy and Kanovitz declined to comment.
Ultimately, the legal brawl exposes a larger problem for AFC: Too much of its money is tied up in a few troubled bets. As of May, Devi and Justice Grown were nearly a third of AFC’s total outstanding loans, with Justice Grown making up almost 20%.
Per usual with Tannenbaum’s companies, AFC shareholders are bearing the brunt. After AFC’s $124 million IPO in March 2021, its shares rose as high as $19, giving it a market capitalization of $390 million by that November. Today shares trade at less than $3 and its market cap is $62 million.
As shareholders lick their wounds and AFC’s attorneys bleed the company, Tannenbaum has been lining his pockets, again. Between 2021 and Q1 2026, AFC has paid about $53 million in management and incentive fees to its external manager, AFC Management, LLC, whose parent is 92% owned by the Tannenbaum family. As AFC’s largest shareholder, Tannenbaum has personally collected no less than $30 million in dividends since 2020.
The dust has yet to settle on his cannabis adventures, meanwhile, and he appears to be moving on. In 2024, AFC spun out its non-cannabis holdings into Sunrise Realty Trust, and Tannenbaum stepped down as AFC’s chief investment officer and CEO. Earlier this year, AFC legally restructured from a weed-focused mortgage REIT into a BDC, broadening its investment focus. “[Tannenbaum’s] interests are aligned with the other shareholders and his focus is on delivering returns for investors over the long term,” insists a spokesperson. Even so, Tannenbaum recently told Bloomberg that he is raising a new fund with $50 million of his own capital. His new pitch: Invest in the bargain loans that others made to enterprise software companies now being crushed by the rise of AI in the so-called “SaaSpocalypse.”
Tannenbaum will undoubtedly come up roses in this new business, but his investors? They may well end up left in the dirt.
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