BISMARCK — The first investment by North Dakota’s fledgling Wonder Fund conflicted with federal rules and had to be bought out by a separate state economic development fund.

The company that was invested in also has not lived up to its commitment to establish a base in the state, and an official with the LandTrust company says it is still trying to become profitable. The Commerce Department believes the company is moving in the right direction and remains “excited” about it.

The developments came to light as the Tribune looked into a recently filed unrelated
federal lawsuit against Wonder Fund overseer Kevin O’Leary and CEO Paul Palandjian.
The Colorado suit accuses them of fraud; the fund’s lawyer denies the allegations.

The first Wonder Fund investment under O’Leary was
$1.25 million in March 2023
in
LandTrust
, a company that lets outdoors enthusiasts pay to use private lands. The company is based in Alabama but was founded in Montana.

LandTrust had
indicated plans to open a corporate office in North Dakota
in a push to expand its Midwest presence. The North Dakota Development Fund — which provides gap financing to businesses through loans and equity investments not available from most conventional lenders or investors to boost economic development — gave the company a $600,000 loan in April 2023 to help it open a corporate office in the state. The loan was approved by the fund in April 2022, prior to Wonder Fund’s investment.

LandTrust went on to rent a Fargo office, but only ever employed a maximum of three people in the state. In fall 2024, LandTrust closed the Fargo office and two North Dakota employees left, according to Collin Trottier, a landowner and customer success associate for LandTrust. Since then, Trottier has been the only company employee to work in the state, and the company’s only local corporate presence has been a “virtual mailbox” in Fargo, he said. Trottier told the Tribune he works from home but can use Fargo’s rentable common office space a limited number of times with a punch card when needed.

Wonder Fund money comes from the U.S. Treasury Department’s State Small Business Credit Initiative. The North Dakota Development Fund was created with state money. Both are under the state Commerce Department’s umbrella, and require that any business that receives funding be primarily based or operating in the state. The Wonder Fund will consider companies based outside of North Dakota if their product or service has a “material impact” on the state, according to Commerce.

In April 2024, the North Dakota Development Fund
bought out the Wonder Fund’s investment in LandTrust.

Development Fund staff had learned that the U.S. Department of Treasury classified Development Fund board members as “insiders,” meaning they have access to U.S. government resources. Insiders cannot invest government money in a venture they might personally gain from.

This exposed a conflict because one of the Development Fund board members managed a fund that had invested in LandTrust before the Wonder Fund did. The Development Fund self-reported this conflict to the Treasury Department, according to Commerce.

The Wonder Fund operates independently of the Development Fund but is under its umbrella. The Treasury Department would have reduced North Dakota’s federal allocation for the Wonder Fund if that fund had kept its investment in LandTrust, according to Commerce.

The Development Fund decided to rectify the situation by purchasing the Wonder Fund’s investment in LandTrust. The company aligned with the “development mission” of the Development Fund, and it would have been otherwise difficult for the Wonder Fund to easily sell off the early stage investment, according to Commerce.

The board member with a conflict abstained from discussion or voting on the purchase, and the entire matter was handled “transparently, in consultation with Treasury, and in full compliance with federal and state conflict-of-interest requirements,” Commerce told the Tribune.

The Development Fund board member with a conflict of interest did disclose their conflict in 2022 when the Development Fund approved the $600,000 loan for LandTrust prior to the Wonder Fund’s investment. But the Wonder Fund was unaware of the conflict when it decided to invest in LandTrust.

The Wonder Fund does its own conflict-of-interest checks. The conflict disclosure did not trigger any alarm bells because, at the time, “neither Wonder Fund nor NDDF staff believed that NDDF board members were classified as ‘insiders’ under Treasury’s SSBCI (State Small Business Credit Initiative) guidance,” so the Wonder Fund did not know to include Development Fund board members in its screening, according to Commerce.

Commerce did not immediately provide the Tribune with the name of the Development Fund board member with the conflict, saying it needed to consult with the department’s special assistant attorney general on releasing the information.

LandTrust launched in 2019 and is still “working toward profitability,” according to Trottier.

“We are doing really well in terms of revenue brought in, the amount of bookings we’re getting, number of landowners we’re listing with, but yeah, overall, still working toward cash flow positivity or profitability,” he said.

Thirty-five North Dakota property owners have joined the LandTrust platform since Sept. 1, 2023, totaling roughly 50,000 private acres that can be booked for outdoor activities. The company has also registered more than 260 bookings in North Dakota since the same date. The company has property listed in 46 states.

Development Fund CEO Brian Opp said there is always the potential for a business to experience ups and downs, and the fund is flexible and patient with the companies it invests in.

”We do always drive towards that outcome of creating an impact in the state of North Dakota. And sometimes that vision is realized, and other times we have to work with companies along the way in order to either achieve that vision, something close to it, or work out an exit for the Development Fund,” Opp said. “LandTrust, as a business, is trending in a very positive direction, and we continue to be excited about that group.”