Former Abraaj managing partner Sivendran Vetttivetpillai attempted to hide the firm's precarious financial position from investors while trying to raise $6bn for a private equity fund, according to US court documents.
Vettivetpillai, 52, sent an email to Abraaj officials in January 2018 advocating the approach after $230m was allegedly moved from a health fund to prop up other parts of the business, US prosecutors claim.
Abraaj was at that time seeking to raise billions of dollars for a new fund, the Abraaj Private Equity Fund VI (APEF VI) based on its pioneering reputation as an investor in emerging markets and a track record of "positive performance".
By fraudulently claiming that Abraaj funds were more successful than they were, these inflated valuations deprived investors of accurate information on which to base their investment decisions"
Abraaj was forced into liquidation less than six months later after investors, including the Bill & Melinda Gates Foundation, commissioned an audit to investigate the alleged mismanagement of money in its healthcare fund. It emerged that the firm's main revenues had not covered its operating costs for years.
In the indictment, US federal prosecutors allege that Vetttivetpillai, Abraaj founder and chief executive Arif Naqvi and others "inflated the valuations of investments in private equity funds…by more than half a billion dollars".
"By fraudulently claiming that Abraaj funds were more successful than they were, these inflated valuations deprived investors of accurate information on which to base their investment decisions," the indictment said, the Arabian Business reports.
As part of the scheme, the indictment claims that money advanced by investors was misappropriated to "cover liquidity shortfalls within Abraaj" for the personal benefit of Naqvi and others, including Vetttivetpillai.
Defrauded investors included "several" US financial institutions, retirement and pension funds, as well as a US government agency.
Vettivetpillai last week became the third former director of the Abraaj Group to be arrested in the aftermath of the world's biggest private-equity insolvency.
He has been accused by US prosecutors of involvement in a scheme to defraud investors of hundreds of millions of dollars.
Both Vettivetpillai and Naqvi, were arrested in the United Kingdom and face potential extradition to the United States. A third executive, Mustafa Abdel-Wadood, triggered the series of arrests when he was detained in New York after arriving with his wife and son to look at colleges.
The case in a London court to extradite Arif Naqvi to the United States on fraud charges, was adjourned until April 26. Naqvi, in a statement released through a PR firm, pleaded innocent last week.
Dubai's financial services regulator said last week that it was in touch with the US Securities and Exchange Commission about the latest case involving collapsed private equity firm Abraaj.
US-based investment manager Colony Capital has wrapped up the acquisition of the Latin America private equity platform of UAE-based private equity firm Abraaj Group, as the company continues to be sold in pieces.
The acquired entity has been operating in Latin America since 2006. The business oversees more than $700m across 22 investments.
The companies did not reveal how much the acquisition has fetched. The purchased unit will now operate under the name Colony Latam Partners.