Two indictments filed in the Southern District of New York Court have resulted in the arrests of the both the founder of Abraaj Investment Management ('AJM'), Arif Naqvi ('Naqvi'), and the former Managing Partner of the Abraaj Group, Mustapha Abdel-Wadood ('Abdel-Wadood'). Allegations include that Naqvi misappropriated US $230 million to cover cash shortfalls at AJM and its parent company, Abraaj Holdings Ltd. ('Abraaj Holdings'), a Cayman based separate entity to which Joint Provisional Liquidators were appointed in June 2018. Solomon Harris acts for interested parties and we will be keeping a close watching brief on developments in these New York criminal proceedings.
What is the Abraaj Group?
The Abraaj Group was the informal name for a large group of related entities consisting of private equity funds, their general partners, investment advisers, and other entities that Naqvi founded in 2002, and included Abraaj Holdings and AJM. As of 2018, the Abraaj Group reportedly managed over US$13 billion in numerous private equity and other funds that were typically structured as limited partnerships that included United States investors.
What are the allegations against Naqvi?
The Indictment against Arif Naqvi, ('Naqvi') the founder of Abraaj Investment Management ('AJM'), an investment adviser operating in Dubai alleges that he and AJM defrauded the Abraaj Growth Markets Health Fund ('Fund') and United States investors by misappropriating over US$230 million in Fund money. Money is alleged to have been misappropriated to cover cash shortfalls at AJM and its parent company, Abraaj Holdings. The Indictment (Case 1:19-cv-03244) alleges Naqvi largely owned and controlled Abraaj Holdings.
What are the allegations against Abdel-Wadood?
(Case 1:19-cr-00233) The Indictment against Abdel-Wadood alleges securities fraud, wire fraud and conspiracy charges. He is alleged to have devised and carried out a scheme to defraud investors by (a) depriving them of accurate information about material aspects of Abraaj Group's financial health, including information critical to investment decisions, and (b) misappropriating investor funds for illicit purposes.
Where were they arrested?
Naqvi was arrested in London. It is understood that he maintains his innocence, and he fully expects to be cleared of any charges. He faces extradition proceedings due to be heard soon. Abdul Wadood was arrested in New York and he has pleaded not guilty to the charges against him.
Watch this space
The scale of the allegations and the implications for the reputation of the Private Equity industry mean that this is an important move by the USA's Securities and Exchange Commission which will be very closely watched around the world. Solomon Harris acts for interested parties and will be following the criminal proceedings as they develop.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.