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........

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