The Dubai Financial Services Authority DFSA has imposed a huge penalty on the founder of Abraaj Group. A former senior manager of the defunct Middle East private equity firm, which is accused of massive fraud, has also been penalized by the Dubai’s regulatory body.
While Pakistan-born Abraaj Group founder faces a staggering fine of $135.5 million (AED497.8 million) “for serious failings,” the defunct firm’s former senior manager and one-time Chief Operating Officer Waqar Siddique has to pay $1.15 million (AED4,223,375), according to the latest decision notices published by the DFSA.
In a statement, the DFSA said that Naqvi was knowingly involved in misleading investors over the misuse of their funds by Abraaj Investment Limited (AIML), a Cayman Islands-registered firm not authorised by the authority.
The DFSA highlighted that Naqvi personally proposed, orchestrated, authorised, and executed actions that directly or indirectly misled and deceived the investors as he: Instructed the use of investor monies to fund the Abraaj Group’s working capital and other commitments; Ranked investors according to the likelihood they would complain or challenge and withheld sale proceeds and reports from those investors who were less likely to do so; Approved and personally drafted false and misleading statements to investors to cover up the misuse of their funds.
Naqvi also attempted to appeal to more senior staff members at the investors’ organisations to quash their queries; Was central to the cover-up of a $400m shortfall across two funds by temporarily borrowing monies for the purpose of producing bank balance confirmations and financial statements to mislead auditors and investors; Approved the change of a fund’s financial year end to avoid disclosing a $200m shortfall; Personally arranged to borrow $350m from an individual in an attempt to make the Abraaj Group appear solvent and appease the demands of investors.
The DFSA’s decision notices suggest that Naqvi and Siddique disputed its findings and have referred the Decision Notices to the Financial Markets Tribunal (FMT), where the parties will present their respective cases. “The DFSA’s decisions are therefore provisional and reflect the DFSA’s belief as to what occurred and how it considers their conduct should be characterised,” the authority said in a statement.
The DFSA added that Naqvi instructed and encouraged other members of Abraaj’s senior management to mislead and deceive the investors and stakeholders of the funds. It also claims that Naqvi was knowingly involved in AIML, carrying out unauthorised financial service activities in or from the DIFC, through his role as the head of the AIML Global Investment Committee and his actions in managing the Abraaj Funds.
The DFSA’s decision notices suggested that Naqvi and Siddique disputed its findings and have referred the Decision Notices to the Financial Markets Tribunal (FMT), where the parties will present their respective cases. “The DFSA’s decisions are therefore provisional and reflect the DFSA’s belief as to what occurred and how it considers their conduct should be characterised,” the authority said in a statement.
The FMT will determine what, if any, is the appropriate action for the DFSA to take and remit the matter to the DFSA with such directions as the FMT considers appropriate to give effect to its determination. The DFSA’s decisions may be confirmed, varied or overturned as a result of the FMT’s review.
Naqvi has asserted his innocence as he fights extradition from the U.K. to the U.S., where prosecutors allege that Abraaj Group enticed American investors with the promise of socially responsible investments when instead it engaged in massive fraud. He’s also accused of taking hundreds of millions of dollars from Abraaj for personal gain.
The DFSA, meanwhile said that Naqvi instructed and encouraged other members of Abraaj senior management to mislead and deceive the investors and stakeholders of the Funds.
“Mr Naqvi was also knowingly involved in AIML carrying out unauthorised Financial Service activities in or from the DIFC, through his role as the head of the AIML Global Investment Committee and his actions in managing the Abraaj Funds,” the authority said in a statement.
“The significant fine imposed on Mr Naqvi reflects the seriousness of these offences and is based on Mr Naqvi’s earnings from the Abraaj Group,” it added.
Abraaj Group operated out of Dubai’s financial free zone known as Dubai International Finance Center.