Arif Naqvi, the founder of defunct Abraaj Group, has been fined $135.6 million and banned from Dubai's financial center for his role in the private equity firm's 2019 collapse.
The Dubai Financial Services Authority also imposed a $1.15 million fine on Abraaj's former Chief Operating Officer Waqar Siddique. Messrs. Naqvi and Siddique disputed DFSA's findings and have referred the decision notices to the Financial Markets Tribunal.
Mr. Naqvi "personally proposed, orchestrated, authorized, and executed actions that directly or indirectly misled and deceived the investors," the regulator said.
Mr. Naqvi founded Dubai-based Abraaj in 2002 and built it to become one of the world's most influential emerging market investors. He was the face and personality of the group and was knowingly involved in misleading investors over the misuse of their funds through Cayman-registered Abraaj Investment Ltd., DFSA said.
Abraaj, with $14 billion under management, was forced into liquidation after investor concerns over its heath-care fund. Abraaj backers included the Bill & Melinda Gates Foundation and the World Bank's International Finance Corp. Its investments included stakes in health care, clean energy, lending and real estate across Africa, Asia, Latin America and Turkey.
Key charges against Mr. Naqvi include:
- Instructed use of investor funds for Abraaj Group's working capital, commitments.
- Was central to the cover-up of a $400 million shortfall across two funds by temporarily borrowing money 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 $200 million shortfall.
- Personally arranged to borrow $350 million from an individual to make the Abraaj Group appear solvent.
Mr. Siddique, who was a member of Abraaj's senior management team from 2005 and until June 2018, was aware of the $400 million shortfall and was involved in deceiving auditors and investors about the actual cash balance in the funds' bank accounts, including being a signatory to loan agreements used to produce misleading bank balance and financial statements.
The fines are the latest move by the Dubai Financial Services Authority over the Abraaj affair and the people behind a fraud that rattled reputations in the DIFC, the city's financial free-zone and one of the Middle East's biggest business hubs.
Mr. Naqvi faces criminal charges in the U.S. and is currently in the U.K. awaiting extradition. DFSA fined Abraaj a record $315 million for deceiving investors and misappropriating their funds in July 2019 and followed that with slapping a fine on KPMG LLP last year for at least $600 million over its role in the group's insolvency.
The DFSA's decisions may be confirmed, varied or overturned as a result of the tribunal's review.