Abraaj Group Fraud - Summary Judgment For Receivers Of Secured Lender For Information On The Fraud

• Law Firm: Appleby
• Subject Matter: Finance and Banking, Corporate/Commercial Law, Strategy, Criminal Law, Financial Services, M&A/Private Equity, Management, White Collar Crime, Anti-Corruption & Fraud, Fund Finance
• Author: Mr Sebastian Said and Daniel Coelho
• Published date: 20 April 2023

The Grand Court has awarded summary judgment to certain limited partners seeking true and full information from the general partner under section 22 of the Exempted Limited Partnership Act. The decision confirms that section 22 prevails as a substantive right, even where procedural rights to discovery may exist due to ongoing substantive litigation between the relevant parties. The Court has awarded costs to the limited partners, and stayed the substantive proceedings (brought by the manager to determine the limited partners' stakes in the fund) pending performance by the general partner of its section 22 obligations.

INTRODUCTION

The Abraaj Group was a high-profile private equity firm in the Middle East, with an estimated US$14 billion assets under management. In 2018, the Group collapsed amid serious allegations of fraud, mismanagement and comingling of funds which had been concealed from as early as 2014. On 11 September 2019, the Group's holding company (ABRAAJ Holdings Limited) and primary investment manager (Abraaj Investment Management Limited (AIML)) were both placed into official liquidation in the Cayman Islands.

Since the collapse, there have been regulatory and legal proceedings worldwide against various Group entities and former directors. For example, the Dubai Financial Services Authority fined AIML in July 2019 almost US$300 million for misleading and deceiving investors, and fined Arif Naqvi, the Group's founder and former CEO, some US$135 million in January 2022 - the largest ever fine imposed on an individual by the Authority. In the United States District Court in New York, both the Department of Justice and the Securities and Exchange Commission have issued proceedings against AIML, Naqvi and other senior executives for their involvement in the fraud. Naqvi, who is currently in the United Kingdom, has recently unsuccessfully appealed in the English courts the UK's decision to extradite him to the US.

In the Cayman Islands, there have also been proceedings in the Financial Services Division of the Grand Court for and against entities within the Group by parties seeking to recover funds. These proceedings include: (i) a claim by Mr Abdulhameed Jafar to recover some US$300 million from the Group which he agreed to lend in 2017; and (ii) a claim by the joint official liquidators of ABRAAJ Holdings to recover some US$110 million against a holding company of certain "Healthcare Funds" in the Group. A common thread to most Abraaj related claims is the difficulty in obtaining sufficient information and documents, given the way the Group had been managed.

On 10 March 2023, the Grand Court published a new decision confirming the broad statutory entitlement of a limited partner under section 22 of the Exempted Limited Partnership Act (the Act) to obtain true and full information from the general partner of a Cayman exempted limited partnership (ELP) - the Neoma Private Equity Fund L.P. (NPEF IV) - which was once an investment fund in the Abraaj Group. In granting summary judgment to the limited partners against NPEF IV's general partner - ABRAAJ General Partner VIII Limited (GP) - and fund manager (Manager), Justice Parker in Neoma Manager (Mauritius) Limited, in its capacity...