Dubai: The Dubai Financial Services Authority (DFSA) Wednesday imposed a penalty of $1.92 million (Dh7 million) on Mustafa Abdel-Wadood, former managing partner of Abraaj.
The DFSA notice prohibits and restricts Abdel-Wadood from performing any function in connection with the provision of financial services in or from the Dubai International Financial Centre (DIFC).
Abdel-Wadood was one of the most senior figures at the Abraaj Group for more than a decade, from July 2006 to February 2018, where he held various roles including the roles of Managing Partner, Global Head of Private Equity, and Board Member. From April 2010, Abdel-Wadood was also the Senior Executive Officer (SEO) of Abraaj Capital Limited (ACLD), the DFSA Authorised Firm of the Abraaj Group.
The DFSA has taken enforcement action against Abdel-Wadood for his involvement in breaches of DIFC legislation by Abraaj Investment Management Limited (AIML), a Cayman entity not authorised by the DFSA. AIML carried out unauthorised Financial Service activities in or from the DIFC and actively misled and deceived investors in Abraaj funds.
Misuse of funds
In particular, Abdel-Wadood was involved in the misuse of investor funds, the withholding of sale proceeds and reports from investors, providing false explanations to investors, and the cover of a USD 200 million shortfall in a fund at its financial reporting date.
The DFSA statement said Abdel-Wadood has pleaded guilty to all criminal charges brought by the US Department of Justice. He stated in his guilty plea that he “stood by silently while Abraaj’s track record was overstated and its financial health falsely portrayed”.
According to DFSA, Abdel-Wadood was involved in AIML’s unauthorised financial service activities through his actions in managing the Abraaj funds from the DIFC and his role as a permanent member of the AIML Global Investment Committee.
Serious offence
The fine imposed reflects the seriousness of the offences and is based on Abdel-Wadood’s earnings from the Abraaj Group. In setting the fine amount, the DFSA has given due consideration to the significant level of cooperation that Abdel-Wadood has provided and continues to provide to the DFSA and the US authorities and there is no evidence to suggest that Abdel-Wadood received a direct economic benefit as a result of his actions.
“Abdel-Wadood was one of the most senior and influential persons at the Abraaj Group. His position within the Group and his reputation with investors allowed the Abraaj Group to mask its true financial position and the extent of its misuse of investor funds,” said Christopher Calabia, Chief Executive of the DFSA.
Over the past two years, Abdel-Wadood has been cooperating with the US authorities and the DFSA, which is reflected in the reduction of his fine.
“We continue our actions against other individuals who were involved in Abraaj’s misconduct, and we will make any further public announcements at the appropriate time,” said Calabia.
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Abraaj managed more than 40 private equity funds and assets of more than $14 billion until it crumbled in the biggest failure for a private equity firm.
Problems began in February 2018 with allegations that money in Abraaj’s health fund had been misused. Arif Naqvi, founder and ex-CEO of Abraaj denied wrongdoing and blamed unforeseen political and regulatory hurdles for a delay in deploying the money.
After Abraaj defaulted on loans, Kuwait’s Public Institution for Social Security and a fund linked to Sharjah-based Crescent Group’s Hamid Jafar moved to force the company into a court-supervised restructuring.
Abraaj Investment Management Ltd., which managed the private equity funds, and its parent, Abraaj Holdings Ltd, filed for provisional liquidation in the Cayman Islands, where they are registered.
In the liquidation process several irregularities including mismanagement and misappropriation of funds were discovered. Dubai’s financial regulator DFSA fined Abraaj $315 million for deceiving investors and misappropriating their funds.
