Dubai pays for the slow pace of investigations in Abraaj Group scandal

The Abraaj scandal, due to delays in investigation procedures, has seriously damaged Dubai’s reputation first, and the UAE in general, as well as its negative impact on the investment market in private equity companies.

The Dubai Financial Services Authority (DFSA) has subjected the collapsed towers group to in-depth investigations for months, leading to massive liquidation and fines.

Monitoring the development of the Dubai authorities’ investigations with the group’s officials since the beginning of the crisis shows a slow process of dealing with a large file of this type, at a time when the emirate is experiencing deep economic and commercial stagnation, also affected by its involvement in regional wars and its participation in the Gulf crisis.

In January 2018, the Dubai authorities received a complaint from an anonymous source alleging that Abraaj misused investors’ money.

In March 2018, the Dubai authorities started Abraaj Capital Limited and then asked the group to submit a separate third party report to prove the solvency issues.

In April 2018, the compliance officer informed the Authority that Abraaj had violated capital requirements for most of the past nine months.

In May 2018, the Dubai authorities prevented Abraaj Capital from dealing with any new clients.

In June 2018, in the first public statement, Dubai authorities said they were “aware of the different things” about Abraaj.

Abraaj Investment Management Limited and Abraaj Holding subsequently began the temporary liquidation of their own volition, and then a court in the Cayman Islands ordered the appointment of a joint interim liquidator.

In August 2018, the DIFC Courts set up Abraaj Capital in the interim liquidation.

In July 2019, the DFSA imposed a fine on two entities, Abraaj Capital and Abraaj Investment Management.

Dubai’s Abraaj Group, founded by businessman Arif Naqvi, collapsed in Dubai two years after the money abuse scandal he ran for investors left the entire Middle East region with almost no deals on the private equity market.

The collapse of the Abraaj Group not only resulted in the collapse of Arif Naqvi’s private equity firm, but also destroyed the entire market.

Since the start of the sudden and rapid demise of Abraj nearly two years ago, when investors, such as Bill Gates, began to suspect, no money was raised from GCC private equity firms, despite its strong performance almost everywhere else .

Bloomberg quoted the US data provider PitchBook in Seattle and Preqin in London.

“The collapse of Abraaj has eroded the confidence of its institutional investors in private equity firms emerging in the market over the past 15 years,” said Alex Jamesey, chairman of Greenstone Equity Partners. “We do not see a large spread of foreign institutional capital of fund managers residing in the Middle East.”

Unless such an exceptional situation helps to slow the DIFC’s oversight authority in responding to irregularities that, in less than 10 months, have led to the downfall of a company that managed one day of investment totaling $ 14 billion.

After all this, the DFSA imposed a $ 315 million fine on Abraaj last Tuesday, a move investors considered too late, since the Securities and Exchange Commission (SEC) Founder Arif Naqvi and a number of officials of his inner circle on charges related to extortion and fraud.