Arif Naqvi, the embattled founder of the insolvent private equity firm, was arrested last week in the UK on US fraud charges after allegedly misappropriating $230 million from a healthcare fund, according to reports. In addition, former Abraaj managing partner Mustafa Adbel-Wadood was arrested in a New York hotel on Thursday on the same charges while on a family trip taking his son to visit colleges.
Abdel-Wooded has pleaded not guilty, with a hearing scheduled in New York for next Thursday. Prosecutors are reportedly trying to extradite Naqvi, who has also denied the charges through his PR firm, with an extradition hearing in London scheduled for the same day.
Both Naqvi and Abdel-Wadood were hit with a slew of charges from the US District Court for the Southern District of New York, including conspiracy, wire fraud and securities fraud. The alleged crimes include inflating assets by more than $500 million to mislead investors from 2014 to 2018 and using money designated for investments to cover the firm’s operating costs without notifying LPs. Naqvi has also been accused of stealing money, including from Abdel-Wadood, for his own personal dealings.
Founded in 2002 and based in Dubai, Abraaj was once a respected investor in the private equity world for its deft deals in emerging markets, building its AUM to some $14 billion. To make it even more attractive to LPs, the firm specialized in making so-called social impact investments, as it backed healthcare, energy and other industries in the Middle East, Africa and elsewhere. But trouble began in early 2017 when The Wall Street Journal reported the Bill & Melinda Gates Foundation and other LPs had accused Abraaj of misappropriating a $1 billion healthcare fund that was intended to invest in hospitals in Africa and Asia.
Investors quickly lost confidence in the firm, and a string of audits and executive departures soon followed. The firm ultimately filed for provisional liquidation in the Cayman Islands last June. Appointed to oversee the assets, Deloitte has been trying to unload the firm's funds in recent months, though no deals have been finalized as it struggles to protect itself from possible legal challenges.
Meanwhile, Naqvi has faced legal trouble of his own in the UAE after he was charged earlier this year in a $217 million bounced-check scandal. The court initially sentenced the investor to three years in prison, but he eventually settled the case without facing jail time.
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Related read: How a private equity powerhouse went bust