The Dubai Financial Services Authority fined Abraaj Group units Abraaj Investment Management Ltd. and Abraaj Capital Ltd. $299.3 million and $15.3 million, respectively, for serious wrongdoings.
The Dubai Financial Services Authority, or DFSA, which started its investigation into Abraaj in January 2018, said on July 30 that the probe found that Abraaj Investment Management carried out unauthorized activities within and from the Dubai International Financial Centre and actively misled and deceived investors in Abraaj funds over an extended period. The company also "misused investors' monies in various funds to meet its own operating and other expenses, which included payments to entities connected to some members of AIML staff, and to meet ever-increasing cash shortfalls," the regulator said. The DFSA also found that the company concealed its shortfalls by providing misleading information to investors.
Abraaj Capital, meanwhile, was found to have failed to observe minimum standards of integrity and fair dealing, ensure that its affairs were managed effectively and responsibly, and deal with the regulator in an open and cooperative manner, according to the DFSA.
The regulator said, however, that there is a "significant risk" that the record fine will not be collected because of the group's liquidation, The Wall Street Journal reported. Abraaj is insolvent, and its investors and creditors are looking for ways to repay its debts.
"We would not take any recovery action that would prejudice the interests of fund investors," the DFSA said.
Abraaj's Cayman Islands-registered unit, Abraaj Holdings, filed for provisional liquidation in the Cayman Islands in June 2018. The group came under scrutiny earlier in 2018 after investors in a $1 billion healthcare fund questioned how their funds were being used.