Dubai's financial regulator fined collapsed private-equity firm Abraaj Group $314.6m for deceiving investors and carrying out unauthorized activities, a record penalty in the Persian Gulf emirate.
The Dubai Financial Services Authority (DFSA) announced the penalties on Tuesday as it revealed the first findings of its probe into the Abraaj scandal, which was formally launched in March last year. "We will continue our investigation and pursue all relevant inquiries," said Bryan Stirewalt, DFSA chief executive. "Those guilty of wrongdoing will be brought to account."
Abraaj was the largest private-equity firm in the Middle East with almost $14bn in assets until its meltdown last year. The Bill and Melinda Gates Foundation, Bank of America Corp. and the US government's Overseas Private Investment Corp. were among the investors in Abraaj's funds.
Those guilty of wrongdoing will be brought to account"
The DFSA has imposed financial penalties of $299m (Dh1.098 billion) and $15.27m (Dh56 million) on Abraaj Investment Management and Abraaj Capital respectively.
An investigation carried out by the DFSA found out that the 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," Stirewalt said.
"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.
Abraaj filed for provisional liquidation in June 2018 in the Cayman Islands. Three of its top executives are out on bail but are facing trial in the UK and the United States.