Dubai Financial Services Authority imposes Dh1.15 billion fine on 2 Abraaj companies for fraud

Dubai: The Dubai Financial Services Authority (DFSA) said on Tuesday it has imposed a massive Dh1.15 billion on two Abraaj companies for deceiving investors and the regulator.

Abraaj was the largest leveraged buyout firm in Dubai, but later run into rough weather and eventual closure after Bill and Melinda Gates Foundation accused the firm of co-mingling of its $1 billion healthcare fund.

The DFSA has imposed financial penalties of $299 million (Dh1.098 billion) and $15.27 million (Dh56 million) on Abraaj Investment Management and Abraaj Capital respectively.

An investigation carried out by the DFSA found out that the PE firm actively misled and deceived investors and also conducted unauthorised financial services; moreover, it was accused of misusing investor monies to cover operating expenses.

“The size of these fines reflects the seriousness with which the DFSA views AIML’s and ACLD’s contraventions," Bryan Stirewalt, Chief Executive of the DFSA, said in a statement.

"Senior management rode roughshod over their compliance function and the misconduct and deceit were pervasive and persistent. We will pursue the persons or entities who perpetrated this activity, including those who allowed this to happen through major corporate governance breaches, to the full extent of our powers,” Stirewalt added.

The DFSA said Abraaj’s compliance had raised concerns about the group’s malpractices in 2009, but the management ignored their concerns.

Top Abraaj executives are out on bail but are facing trial in the UK and the United States.

Former Abraaj Managing Partner Mustafa Abdul Wadood has agreed to cooperate with US prosecutors in the case and has also accepted that he decieved investors at the direction of the founder Arif Naqvi.

The embattled private equity firm Abraaj have been attempting to sell its funds since the beginning of the year, and the said transaction has been the first success.