Abraaj founder Arif Naqvi charged with fraud in New York

Arif Naqvi, the founder of the collapsed Dubai-based private-equity firm The Abraaj Group, has been charged with fraud and conspiracy.

Abraaj’s two most senior executives have been arrested in relation to US fraud charges that claim they defrauded investors by lying over the financial wellbeing of the collapsed Dubai-based private equity group.

Arif Naqvi, Abraaj’s founder and chief executive, and Mustafa Abdel-Wadood, a managing partner at the group, have been charged with securities fraud, wire fraud and conspiracy, according to indictments made by the US attorney office for the southern district of New York.

Andrea Griswold, assistant US attorney, said at a hearing in Manhattan federal court on Thursday that Mr Naqvi had been arrested in London and Mr Abdel-Wadood detained in New York, Reuters reported.

Mr Abdel-Wadood, who was arrested on a visit to the US, pleaded not guilty to the charges during the hearing. Ms Griswold said prosecutors would seek to extradite Mr Naqvi, who has always denied any wrongdoing related to the collapse.

Abraaj, one of the largest emerging-markets private equity investors, claiming $13bn of assets under management, was sent into a death spiral last year after investors complained about mishandling of their monies in the group’s healthcare fund.

As confidence eroded, the group was forced to place itself into provisional liquidation in the Cayman Islands to protect itself from legal action and winding-up orders by creditors.

The indictments accuse Messrs Naqvi and Abdel-Wadood of defrauding investors by “depriving them of accurate information about . . . Abraaj’s financial health” and misappropriating investor funds “for illicit purposes”.

Funds were diverted to cover undisclosed liquidity shortfalls in Abraaj, the indictments claim, as well as for the “personal benefit” of Messrs Naqvi and Abdel-Wadood, among others.

Mr Naqvi presented “false and misleading information” on Abraaj funds at an investor meeting in Manhattan around November 2017, the prosecutors allege.

Prosecutors also claim that Abraaj inflated the value of their funds by more than $500m and misappropriated “at least hundreds of millions of investors’ funds”.

To hide the scheme, Mr Naqvi and others provided misleading responses to investor requests on how their funds were being used, the indictments claim. The firm promoted the scheme “through lies and omissions to financial regulators”, the indictments add.

The Securities and Exchange Commission also charged Mr Naqvi and Abraaj’s asset management arm with misappropriating money from its heathcare fund, which had over three years collected more than $100m from US investors, and using the funds for other purposes.

The collapse of Abraaj has sent shockwaves through the regional private equity industry, raising questions over corporate governance in the Middle East.

The liquidation process in the Cayman Islands has been faltering amid concern over potential legal risk for firms seeking to take over management of Abraaj’s funds.

As well as negotiating to hand over Abraaj’s funds to new management, the liquidators have been seeking to sell the firm’s assets to cover about $1.1bn in debts and settle staff dues.