Dubai regulator issues Dhs497m fine on Abraaj Group founder Arif Naqvi

The Dubai Financial Services Authority (DFSA) has issued a Dhs497,866,807 fine on Abraaj Group founder Arif Masood Naqvi, as well as Dhs4,223,375 fine on Waqar Siddique, a senior member of Abraaj’s management team.

In a statement issued on Thursday, the DFSA said that the action in its Decision Notice on the matter was taken “for serious failings” of the Abraaj Group.

Naqvi founded Abraaj Group in 2002, and it grew to become the largest private equity firm in the region, with an estimated $14bn in assets under management. Abraaj went into liquidation in 2018 following a process that began when investors including the Bill & Melinda Gates Foundation ordered a probe into the use of money from Abraaj’s healthcare fund.

Read: Abraaj ex-CEO’s alleged theft cost the firm $385m – liquidators

The Decision Notice states 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 DFSA.

In particular, the DFSA found 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 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.

Both Naqvi and Siddique have reportedly disputed the DFSA’s findings, and have referred the Decision Notice to the Financial Markets Tribunal (FMT), where the parties will present their respective cases, a statement said.

The DFSA’s said that its decisions are therefore provisional, and reflect the DFSA’s belief as to what occurred and how it considers their conduct should be characterised. The FMT will now determine what, if any, is the appropriate action for the DFSA to take.

The DFSA added in its statement that both Siddique and Naqvi applied to the FMT for orders to prevent the DFSA from publishing the Decision Notices and to have the FMT hearings held in private. However, this month, the FMT determined that the DFSA could publish the Decision Notice and that the FMT hearings will be public.

The FMT has stayed the operation of the financial penalties until the conclusion of the FMT proceedings but the prohibition and restrictions on Naqvi and Siddique from performing any function in or from the DIFC remains in effect.

The DFS noted that its decision may be confirmed, varied or overturned as a result of the FMT’s review.