Ransomware hangover, Putin grudge blamed for vodka maker’s bankruptcy – Source: go.theregister.com

Two US subsidiaries of alcohol giant Stoli Group filed for bankruptcy protection this week over financial difficulties exacerbated by an August ransomware attack.

Charles Caldwell, CEO at Stoli USA and Kentucky Owl (KO), told the bankruptcy court in Dallas, Texas, that they faced more than $84 million in debts.

Among the various factors adding to the subsidiaries’ financial difficulties, he revealed that Stoli Group is still reeling from a “data breach and ransomware attack” back in August, which hasn’t been claimed by any known crime group.

The incident “caused substantial operational issues throughout all companies within the Stoli Group, including Stoli USA and KO, due to the Stoli Group’s enterprise resource planning (ERP) system being disabled and most of the Stoli Group’s internal processes (including accounting functions) being forced into a manual entry mode.”

Caldwell suggested that the affected systems are still not back online fully, saying they should be restored no later than Q1 2025.

Compliance issues arose as a result, namely related to the subsidiaries’ reporting requirements to lenders.

In addition to softened demand for hard alcohol products following the COVID-19 pandemic, and increased costs related to a weakened global economy, the Stoli Group said its longstanding legal battle with Putin’s government came at a great cost to the company.

“Dozens of millions” have been spent on the company’s 23-year litigation with Putin’s authorities, who believe Russia has a claim to the Stolichnaya and Moskovskaya brands.

Stoli Group was bought by Yuri Shefler in 1997 following the Soviet Union’s collapse but shortly after Putin came to power in 1999, he signed an executive order in March 2000 that aimed to reclaim the country’s ownership of the now-privatized vodka trademarks.

The fallout permanently forced Shefler out of Russia following his alleged persecution and the “fabricated criminal charges” leveled against him.

Since then, Stoli Group moved to Luxembourg and the owner – now a UK citizen – has been an outspoken critic of Putin’s invasion of Ukraine.

Russia branded Shefler and Stoli Group “extremists” in July 2024 because of their support for Ukrainian refugees, prompting Putin to seize two company distilleries, the last of the company’s Russia-based assets, worth an estimated $100 million.

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All of these “atypical events” combined have led to a worsened financial condition at the company. Caldwell said management “acted diligently and aggressively” to address both subsidiaries’ operational and liquidity challenges, but it hasn’t been enough to reverse its fortunes.

Caldwell also alluded to a fractured relationship with the companies’ lender, which he said in a declaration to the court [PDF] had refused requests for additional funds to be released.

Separate documents show the subsidiaries owe six-figure sums to at least 30 different companies including marketing agencies, accountancy businesses, and professional sports teams.

The filing of the chapter 11 cases, which would provide protection from creditors while the companies reorganize, was “necessary to maximize value for the benefit of all creditors,” the CEO said.

The revelation follows a similar case in October when Jerico Pictures, the company behind data brokerage National Public Data (NPD), also filed for bankruptcy.

NPD was the target of a digital heist in June when USDoD posted billions of individuals’ data online. Naturally, a litany of class actions followed, but given the company’s ultra-lean makeup, with assets only amounting to around $75,000 at the upper end of estimates, any damages awarded to claimants would be in fractions of cents. ®