Between intermittent green wisps of shrubbery in the bare Nevada desert, there is a 1,600-foot-long life size white tube. The structure, propped up from the ground, is almost 11 feet wide. It is the testing site for Hyperloop, a kind of compressed-air bullet train that is supposed to one day shoot people from city to city at 700 miles per hour.

Los Angeles-based technology company Virgin Hyperloop One, headed by British businessman Sir Richard Branson, is developing the system, originally designed by Elon Musk and engineers at SpaceX in 2013. With the promise of almost lightning-quick transportation, the company attracted the attention of governments across the world and has raised more than $245 million in capital from investors in the UAE, Saudi Arabia, and China.

There’s one investor, though, that the company consistently keeps off its website and releases: the Russian Direct Investment Fund, one of the country’s sovereign wealth funds, and the only one under U.S. sanctions. One economist based in Moscow—Chris Weafer, a senior partner at Macro Advisory—noted that some high-level deals struck by the Russian Direct Investment Fund involve some level of input by the executive branch of the Russian government.

Musk spokesmen said the billionaire is not involved with Virgin Hyperloop One. He heads the Boring Company, which is on its way to building its own Hyperloop-style system.

Two years after the Russian Direct Investment Fund’s investment in Virgin Hyperloop One, U.S. officials say they have become increasingly wary of the deal and others that include Russian sovereign wealth. Congressional leaders are actively looking at targeting RDIF under the new “sanctions from hell” bill proposed by Sen. Bob Menendez (D-NJ) and Sen. Lindsey Graham (R-SC), two people involved with the efforts told The Daily Beast.

“ There was a surprise when the fund invested in Hyperloop One. But Putin likes to keep bad politics in one drawer and good investment in the other. ” — Macro Advisory’s Chris Weafer

The fund, whose CEO, Kirill Dmitriev, was involved in a meeting with Erik Prince in the Seychelles in 2017, has invested in Hyperloop at least twice. The fund made its first investment in April 2016, according to public disclosures, at a time when the Russian government was actively interfering in the 2016 presidential elections. In October 2017, Dmitriev announced that the fund had invested a second time with the Chinese Investment Corporation, China’s sovereign wealth fund. According to data obtained by The Daily Beast, the fund’s investment in the Hyperloop company appears to be one of its only investments in a U.S. business since sanctions went into place in 2014.

The investment deals between the fund and the Hyperloop company are legal under U.S. sanctions law. However, it’s unclear how much money the fund put into the company or what kind of power it wields over its board. The Russian Direct Investment Fund and Virgin Hyperloop One did not return emails or phone calls from The Daily Beast about this story.

Interviews conducted with 13 former and current U.S. officials, as well as economists and lawyers, reveal the inner workings of how, despite the burden of U.S. sanctions, the fund, whose CEO is appointed by Putin, found a way to capitalize on Elon Musk’s dream of futuristic high speed transportation and inked a deal with one of the hottest technology companies in the U.S. The individuals requested anonymity because they were either not permitted to talk publicly about the matter or feared retribution from the Trump White House.

The Russian Direct Investment Fund’s deal with the Hyperloop company, officials said, was struck at a time when U.S.-Russia relations were souring but still manageable from a national security perspective. Now they’re at an all-time low, the officials said, and the administration is worried about relying on anything Russian supporting U.S. companies. Meanwhile, RDIF has invested in a sensitive piece of U.S. technology that could end up benefiting Russia before it benefits the United States.

Russia plans to use the Hyperloop system to strengthen trade ties with one of America’s biggest competitors: China. Russian officials are already exploring ways to build a Hyperloop in Moscow and other parts of the country to support President Xi Jinping’s One Belt One Road initiative, the trillion-dollar infrastructure project that will link Asia, the Middle East, Africa, and Europe.

“The fund’s scope allows it to invest outside the country in projects that could have application inside the country,” said Weafer, the economist in Moscow. “There was a surprise when the fund invested in Hyperloop One. But Putin likes to keep bad politics in one drawer and good investment in the other.”

The Hyperloop transportation system, as Musk designed it, is supposed to make daily commuting easier—an alternative to a high-speed rail that had been proposed in California. The plan? A scene out of The Jetsons: Put people in pods and use compressed air to shoot them through a tube at supersonic speed so they can make their morning meetings. Musk envisioned people commuting from Los Angeles to San Francisco in 30 minutes. “Is there truly a new mode of transport—a fifth mode after planes, trains, cars and boats?” Musk asked in a 57-page white paper describing the notion.

In that paper, Musk admits the entire plan seems a bit out there. “When you get right down to it, going through transonic buffet in a tube is just fundamentally a dodgy prospect,” he writes.

But Musk believed in the design so much that he called on others—anyone—to try and build the system in real time, and revolutionize the way the world travels. If it all worked out, whoever made Musk’s dream come true would make history, the transportation equivalent of landing on the Moon... or Mars. Musk is trying to do that, too.

Only a few attempted to dabble in designing and building Hyperloop.

Shervin Pishevar and Brogan BamBrogan, formerly “Kevin Brogan,” an engineer at Musk’s SpaceX, started Hyperloop One in 2014 in an attempt to commercialize the technology. Josh Giegel, who previously worked at Virgin Galactic, was later in 2016 named as a co-founder. The company raised close to $300 million in its first few years and began to construct and test a Hyperloop track outside Las Vegas. Both Pishevar and BamBrogan have left the company. BamBrogan is now heading a similar company, Arrivo. Giegel stayed and is the chief technology officer.

Hyperloop One had well-established ties to another big investor, DP World, based out of the UAE. Meanwhile, the company attracted all sorts of investors, including Dagestani business executive Ziyavudin Magomedov. Magomedov, who also holds assets in construction and logistics through his Summa Group, eventually became a board member under Branson’s Virgin Hyperloop One. Magomedov ranked 63rd on Forbes’ list of of Russia’s richest business people last year. In January, the Treasury Department listed him as one of the oligarchs close to Putin.

In March, Russian authorities arrested Magomedov on charges of embezzling more than $35 million in state funds. Magomedov, whose Caspian Venture Capital fund has investments in Uber, was set to be released from custody. In June, he stepped down from the Hyperloop company.

In the spring of 2016, the Hyperloop company raised $80 million in capital, which included an investment from the Russian Direct Investment Fund. The Russian fund’s investment came almost two years after the U.S. government had placed it on the sanctions list.

A former senior official in the Treasury Department told The Daily Beast that although U.S. companies were allowed to do business with Russia, the fear of secondary sanctions forced many to avoid the country altogether. Staffers in the department said they consistently told compliance lawyers not to do business with the Russian Direct Investment Fund because it was a subsidiary of Vnesheconombank (VEB), an entity with employees known across the administration for engaging in illicit dealings, Treasury staffers told The Daily Beast. Evgeny Buryakov, an employee of the bank, pleaded guilty to conspiring to act as an unregistered agent in the U.S. in 2016. Buryakov was accused of gathering economic intelligence on potential U.S. sanctions on Russian banks trying to recruit for the Russian government.

Despite the warnings, the Russian Direct Investment Fund found a way into a deal with a U.S. technology company.

Patrick Schena, a professor at Tufts Fletcher School of Law and Diplomacy, tracks sovereign wealth fund investments across the world. He said that in the summer of 2016, the Russian fund found a way to make investing with Western partners a little less scary.

RDIF partially separated from Vnesheconombank, its parent company, in the summer of 2016. VEB transferred RDIF’s management company to another state-owned enterprise, Rosim, the country’s agency for state property management. (Rosim is not a sanctioned entity.)

“Why would you separate the management company [RDIF]? One of the reasons is to give the appearance of a degree of separation, independence and decision making,” Schena said. The move fell in line with its investment in the Hyperloop company.

“ The Russians are very sophisticated players. They find ways to work [with] sanctions. ” — Chris Weafer

“The Russians are very sophisticated players,” Weafer said. “They find ways to work [with] sanctions.”

But Schena said the RDIF’s assets—in its mutual fund—still appear to be on the books of VEB, the sanctioned bank.

When asked for clarification on whether the Russian Direct Investment Fund was still under U.S. sanctions despite its maneuvers in 2016, the U.S. Treasury Department took almost a month to respond. Its answer: The management fund is still sanctioned. When asked again earlier this month, the department did not seem to understand questions about the separation of the Russian Direct Investment Fund Management Company from its mutual fund in 2016. It also did not answer questions about whether the fund had filed a petition for delisting from the U.S. sanctions list.

The passing of the new legislation under the 2019 National Defense Authorization Act, a series of laws that outlines the budget and expenditures for the Department of Defense, has forced officials to remedy the gap between how the U.S. approached sanctions against Russia in 2014 with how the current administration is reacting to the 2016 election interference.

The new legislation includes language that gives the Committee on Foreign Investment in the United States more jurisdiction in conducting national security reviews of investments. It will be able to conduct those reviews even if the foreign entity, like the Russian Direct Investment Fund, does not have a controlling stake in a U.S. company.

Now, officials involved in reviewing foreign investments told The Daily Beast that the RDIF-Hyperloop deal will most likely require an official probe.

Kevin Wolf, a partner at Akin Gump Strauss Hauer & Feld in Washington, said the committee would most likely review the Russian fund’s investment if the Hyperloop system was officially deemed a critical piece of infrastructure or technology. Wolf served as assistant secretary of commerce for export administration in the Bureau of Industry and Security (BIS) at the Department of Commerce under President Obama.

Meanwhile, back in the desert outside Las Vegas, Virgin Hyperloop One, led by Branson, is advancing its development of the transportation system. In an interview with Quartz in January, Branson said his company’s first Hyperloop project would take place internationally. Several countries, including Russia, are in the running for the first deal.

Last month, Branson and his team invited members of the press back to the Nevada desert for the second time to watch a test run. The pod shot through the tub with ease.

Update (September 1, 2018): RDIF did not return requests for comment by The Daily Beast during its reporting. However, after publication, the fund reached out to The Daily Beast with the following statement:

"RDIF operates purely on a commercial basis, providing our co-investors with attractive returns. Its investment decisions are not politically driven. The fund operates in full compliance with relevant regulations and legislation and its operations do not violate sanctions. The separation from VEB was contemplated from the very moment of RDIF’s inception and has nothing to do with U.S. sanctions or the Hyperloop One investment."

In addition, after publication, Chris Weafer reached out to The Daily Beast to say that he “categorically denies” having said the quotes attributed to him in the article.