Feds who forced Ukrainian investor to sell rocket company backtrack years later

A long, messy affair between US regulators and a Ukrainian businessman named Max Polyakov seems to have finally been resolved.

On Tuesday, Polyakov's venture capital firm Noosphere Venture Partners announced that the US government has released him and his related companies from all conditions imposed upon them in the run-up to the Russian invasion of Ukraine.

This decision comes more than two years after the Committee on Foreign Investment in the United States and the US Air Force forced Polyakov to sell his majority stake in the Texas-based launch company Firefly.

A turbulent past

This rocket company was founded in 2014 by an engineer named Tom Markusic, who ran into financial difficulty as he sought to develop the Alpha rocket. Markusic had to briefly halt Firefly's operations before Polyakov, a colorful and controversial Ukrainian businessman, swooped in and provided a substantial infusion of cash into the company.

The pair had a turbulent relationship, which is chronicled in the book When the Heavens Went on Sale by journalist Ashlee Vance. As part of his reporting, Vance traveled to Ukraine with Polyakov and remained in regular contact throughout the ordeal.

"The US government quite happily allowed Polyakov to pump $200 million into Firefly only to decide he was a potential spy just as the company's first rocket was ready to launch," Vance told Ars. "I've always found the timing of that suspicious and the reasoning behind the accusations against Polyakov flimsy. I obtained every document that I could get my hands on, and the most damaging claim the US could hit Polyakov with was that he hailed from Ukraine, which is near Russia, and that Russia is an enemy of the US in space."

US officials used strong-arm tactics to force Polyakov's hand after Firefly launched its first Alpha rocket in September 2021. Following this unsuccessful debut, the company was working toward a second attempt and preparing to ship the second Alpha to the company's launch site at Vandenberg Space Force Base in California at the end of the year. "It was actually on the trailer when I got a call from the Air Force to not ship it," Markusic told Ars at the time. "We were really anxious to bounce back. Having that delay was really demoralizing, honestly."

Already, by that time, Polyakov had attempted to placate government officials by stepping away from day-to-day operations at Firefly. But after the company's employees were blocked from accessing the launch site in California, something had to give. In February 2022, as Russia prepared to invade Ukraine, Polyakov agreed to sell his holdings in Firefly at what he described as a huge loss. "I hope you now are happy," he said at the time to federal officials. "History will judge all of you guys."

Firefly soars

Far from being a Russian agent, Polyakov worked to help his native country resist. In the early days of the war, he sought to build a pipeline by which commercial synthetic aperture radar data collected by Western companies could be used by Ukrainian defenders to anticipate Russian advances. In conversations I had with Polyakov after the outbreak of the war, he appeared to be incredibly passionate about this mission.

In October 2022, the Alpha rocket launched again with a partially successful flight. In September 2023 it had a fully successful mission, along with growing lines of business including a lander capable of delivering cargo to the Moon and an in-space tug spacecraft. Firefly also partnered with Northrup Grumman to provide rocket engines for a new medium-lift launch vehicle. The privately held company is now valued in excess of $1 billion.

"Polyakov never got the chance to really capitalize on the risk he took with his money," Vance said. "Being forced to sell before a rocket has its first flight means that you miss all of the upside that comes if the rocket does well. Polyakov never had the amount of money as Musk, Bezos, or Branson and so had really taken a massive risk."

In a news release this week from Noosphere, the venture firm said the US Treasury Department informed Polyakov that he is "released from all conditions and obligations that the government imposed on Feb. 28, 2022." It seems unlikely that Polyakov will come back to Firefly, but he could make his return elsewhere in the space industry.