Dubai’s financial regulator has provisionally fined Arif Naqvi, the founder of failed private equity firm Abraaj, $135.6m for misleading investors about the use of their funds.
The Dubai Financial Services Authority also fined the firm’s former head of finance and operations, Waqar Siddique, $1.15m for his role in the “serious failings” at Abraaj, which at its peak managed $14bn in assets across emerging markets.
“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,” the DFSA said in a statement.
Naqvi and Siddique, who have also been barred from performing any function in Dubai’s International Financial Centre, have challenged the notices, which have been referred to a tribunal that reviews DFSA regulatory actions and could overturn the decisions.
They had applied to the tribunal for orders to prevent the DFSA publishing the notices and for the hearings to be held in private. But the tribunal rejected the requests and the hearings will be in public.
Naqvi has denied any wrongdoing. Siddique could not be reached for comment.
Abraaj collapsed in 2018 after investors complained it had misused money in its $1bn healthcare fund. The ensuing collapse in confidence triggered defaults in the firm’s $1bn debt pile.
Naqvi and Siddique are among six executives who have been charged by US authorities for fraud and racketeering relating to Abraaj. In the UK courts, Naqvi is fighting US attempts to extradite him for trial from London, where he is under house arrest.
The DFSA said Naqvi “personally orchestrated” deception of investors — including the use of investor money to fund Abraaj’s working capital — ranked investors according to the likelihood that they would complain and withheld money from those less likely to do so, and drafted misleading statements to cover up the misuse of funds.
The decision notices say he was central to an attempt to cover up a $400m shortfall across two of Abraaj’s funds: by temporarily borrowing money to produce bank balance statements to mislead auditors and by arranging a $350m loan from an individual to make Abraaj appear solvent. Siddique was knowingly involved in deceiving investors, the DFSA said.
The regulator previously fined two Abraaj group entities almost $315m — the largest penalty in the DFSA’s history — for deceiving investors, misusing investor money and carrying out unauthorised activity in the Dubai International Financial Centre.
Officials have conceded that this fine is unlikely to be paid, given administrators’ inability to raise funds to pay back creditors, who were owed more than $1bn when Abraaj collapsed, or to meet financial obligations to former staff.