Law enforcement authorities have arrested and filed fraud charges against two senior executives of the Abraaj Group, the multi-billion-dollar Middle Eastern equity firm that’s undergoing provisional liquidation in the Cayman courts.
According to US authorities, Abraaj founder Arif Naqvi and managing partner Mustafa Abdel-Wadood misappropriated hundreds of millions of dollars from Abraaj funds for their own personal benefit and to cover undisclosed liquidity shortfalls within Abraaj.
The two men also allegedly caused Abraaj to provide investors with false and inflated valuations of funds.
“Abraaj also promoted and sustained the fraud schemes through lies and omissions to financial Regulators,” states the indictments against Naqvi and Abdel-Wadood.
Victims of the two men’s alleged scheme include US investors, retirement and pension funds, a US philanthropic foundation, and a US government agency, the indictments state. The Abraaj Group allegedly owes creditors some US$1 billion and has been accused of misusing hundreds of millions of dollars, including funds from the Bill & Melinda Gates Foundation and the World Bank’s International Finance Corporation.
Naqvi has been arrested in London and Abdel-Wadood detained in New York, Reuters reported. They have been charged with securities fraud, wire fraud and conspiracy.
According to the Financial Times, Abdel-Wadood pleaded not guilty to the charges. Prosecutors are pursuing the extradition of Naqvi, who has always denied any wrongdoing related to the collapse.
Last year, Abraaj’s largest creditor, Kuwait’s Public Institution for Social Security, filed a petition in the Grand Court for the company’s Cayman entities – Abraaj Holdings and Abraaj Investment Management Ltd. – to be wound up and liquidated.
However, Abraaj’s provisional liquidators – Deloitte and PricewaterhouseCoopers – have successfully lobbied the court to delay that winding-up petition and allow them more time to restructure Abraaj’s assets.
At a Grand Court hearing in February, attorneys for the provisional liquidators said they were close to completing the sale of investment-management rights to funds in several regions throughout the world.
The sale of Abraaj’s investment-management rights are expected net the company around $8 million and help it unload loss-making funds from its books. The sale will also allow Abraaj to improve its liquidity and keep its equity stake in other funds – Abraaj has not been making the necessary capital contributions to these funds, but may be able to do so after the sale, according to statements made at the February court hearing.
In addition to its investment-management rights, Abraaj is also proceeding with its sale of its largest asset, the Karachi-based power company K-Electric, to a Chinese buyer. Not much about this transaction was discussed in court due to its commercial sensitivity, but a sale has been agreed to and can hopefully be finalised within six months, according to Deloitte.
Abraaj’s provisional liquidators asked Grand Court Justice Robin McMillan to adjourn Kuwait’s Public Institution for Social Security’s winding-up petition against Abraaj for six more months, in order to give them more time to finalise the sales and restructure Abraaj.
An order to wind up, Abraaj would likely collapse the value of its assets and jeopardise the sale of its fund-management rights, the provisional liquidators argued. The same would hold for the sale of K-Electric, they said at the February hearing.
Justice McMillan granted the six-month extension of the restructuring of Abraaj, but noted that he has already granted three previous extensions. He asked the provisional liquidators at the hearing whether they anticipate that this will be the final extension, and both parties said yes.