SEC v. Abraaj Investment Management Limited; and Arif Naqvi, No. 1:19-cv-03244, Southern District of New York (Apr. 11, 2019) — Complaint

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UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

SECURITIES AND EXCHANGE
COMMISSION,

                                       Plaintiff,

                  v.

ABRAAJ INVESTMENT MANAGEMENT
LIMITED, and ARIF NAQVI,

                                      Defendants.

No. 19-cv-3244

COMPLAINT

JURY TRIAL DEMANDED

Plaintiff Securities and Exchange Commission (the “Commission”), for its Complaint

against Abraaj Investment Management Limited (“Abraaj Investment Management”) and Arif

Naqvi (“Naqvi”) (collectively “Defendants”), alleges as follows:

SUMMARY OF ALLEGATIONS

1. Abraaj Investment Management, an investment adviser operating in Dubai,

United Arab Emirates (“UAE”), and its founder, Naqvi, defrauded the Abraaj Growth Markets

Health Fund (“Abraaj Health Fund” or “Fund”) and United States investors by misappropriating

over $230 million in Fund money from at least September 2016 until at least June 2018

(“Relevant Period”).  While Abraaj Investment Management and Naqvi falsely reported to the

Abraaj Health Fund and its investors that their money would be invested in health care-related

businesses in emerging markets, Abraaj Investment Management – under Naqvi’s control –

misappropriated the money to cover cash shortfalls at Abraaj Investment Management and its

parent company, Abraaj Holdings Ltd. (“Abraaj Holdings”), a separate entity that Naqvi largely

owned and controlled.

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2. Defendants’ materially false statements, omissions, and deceptive acts violated

the anti-fraud provisions of the Investment Advisers Act of 1940, 15 U.S.C. §§ 80b-1-21.  The

Commission respectfully requests, among other things, that the Court enjoin Defendants from

committing further violations of the Federal securities laws as alleged in this Complaint, and

order Defendants to pay disgorgement, plus prejudgment interest, and a monetary penalty based

upon these violations.

JURISDICTION AND VENUE

3. The Court possesses jurisdiction over this action pursuant to Sections 209(d) and

209(e) of the Advisers Act, 15 U.S.C. § 80b-9(d) & (e).

4. Venue lies in this District pursuant to Section 214 of the Advisers Act, 15 U.S.C.

§ 80b-14, because certain of the transactions, acts, practices and courses of conduct constituting

the violations alleged herein occurred within the Southern District of New York.  Among other

things, the Investor Relations Office that supported Abraaj Investment Management and the

Abraaj Health Fund was located in this District, as well as the Fund’s largest United States

investor.

5. In connection with the unlawful conduct alleged in this Complaint, Defendants

solicited and sold partnership interests in the Abraaj Health Fund to United States investors with

whom Defendants maintained regular communication by providing, for example, false or

materially misleading audited financial statements and Quarterly Reports.  United States

investors were also members of the Fund’s Limited Partner Advisory Committee (“LPAC”) and

attended committee meetings during the Relevant Period, including at least one LPAC meeting

that occurred in this District.  These United States investors transmitted capital contributions to

the Abraaj Health Fund from bank accounts in the United States, including at least one bank in

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this District.  Defendants’ unlawful conduct abroad had a foreseeable substantial effect within

the United States because the deceptive acts involved substantial sums of money contributed by

United States investors, and Defendants transmitted misleading information to investors in the

United States.  Further, Defendants made use of the means or instrumentalities of interstate

commerce, and made use of the means or instruments of transportation or communication in

interstate commerce, and of the mails.

DEFENDANTS

6. Abraaj Investment Management, an exempt reporting investment adviser with

the Commission, is a UAE-based and Cayman Islands-incorporated exempted, limited liability

company, and wholly owned subsidiary of Abraaj Holdings.  Abraaj Investment Management is

the Investment Adviser and Manager to, among other private equity funds, the Abraaj Health

Fund.  Abraaj Investment Management voluntarily declared bankruptcy and entered liquidation

proceedings in or around June 2018, in the Grand Court of the Cayman Islands.

7. Naqvi, age 59, is a Pakistani national.  He is the founder and largest owner of

Abraaj Holdings, which is the sole owner of Abraaj Investment Management.  Naqvi exercised

substantial control over Abraaj Holdings, Abraaj Investment Management, and the Abraaj Health

Fund.  According to the Abraaj Health Fund’s private placement memorandum, Naqvi was the

“Head of the Fund” who “led the design of the [Fund] concept and the strategy and business

plan,” and was one of two senior executives responsible for “overseeing the Fund’s activities.”

During the Relevant Period, Naqvi was paid substantial sums from Abraaj Holdings and Abraaj

Investment Management.

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RELEVANT ENTITIES

8. Abraaj Group was the informal name for a large group of related entities

consisting of private equity funds, their general partners, investment advisers, and other entities

that Naqvi founded in 2002, and included Abraaj Holdings and Abraaj Investment Management.

As of 2018, the Abraaj Group reportedly managed over $13 billion in numerous private equity

and other funds that were typically structured as limited partnerships that included United States

investors.

9. Abraaj Holdings is a UAE-based, Cayman Islands-incorporated exempted

limited liability company that Naqvi founded in 2002.  Naqvi was its largest owner.  It serves as

the Abraaj Group’s top-level holding company and owns numerous entities, including Abraaj

Investment Management, other investment adviser entities, and certain private equity funds’

general partners.  Abraaj Holdings also has limited partnership interests in Abraaj Group-

managed funds, and portions of some of the funds’ investment portfolio companies.  Abraaj

Holdings voluntarily declared bankruptcy and entered liquidation proceedings in or around June

2018, in the Grand Court of the Cayman Islands.

10. Abraaj Health Fund is a private equity fund registered in the Cayman Islands.  It

was structured as a limited partnership formed to invest in businesses operating in the healthcare

and related sectors in emerging markets.  Abraaj Investment Management owned and controlled

the Fund’s general partner (“General Partner”).  The Abraaj Health Fund’s first investor closing

date was on September 30, 2015, and its final close was on July 31, 2016, with a total

commitment of $850 million by, among others, United States investors who became limited

partners in the Fund.  On August 18, 2017, a United States governmental entity committed an

additional $150 million debt investment through a finance agreement.  The Abraaj Health Fund

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had several bank accounts in the name of various entities it owned or controlled (“Abraaj Health

Fund Bank Accounts”).  Abraaj Investment Management and Naqvi served as the Abraaj Health

Fund’s investment adviser until mid-2018.  In Form D filings with the Commission, the Abraaj

Health Fund claimed it was exempted from registration with the Commission because it was a

pooled investment vehicle excluded from the definition of an “investment company” in the

Investment Company Act of 1940, 15 U.S.C. §§ 80a-1-64, pursuant to Sections 3(c)(1) and

3(c)(7) of the Act, 15 U.S.C. § 80a-3(c)(1) & (7).

FACTUAL ALLEGATIONS

I. Abraaj Investment Management And Naqvi Were Investment Advisers Who Owed
Fiduciary Duties To The Abraaj Health Fund

11. The Abraaj Health Fund was primarily engaged in, held itself out as being

primarily engaged in, and proposed to engage itself primarily in the business of investing,

reinvesting, and/or trading in securities.  According to the Abraaj Heath Fund limited partnership

agreement (“HFLPA”), the “purpose of the [Abraaj Health Fund] is to carry on the business of

an investor investing in a combination of control and minority investments in existing businesses

and new businesses in the healthcare and related sectors,” including, but not limited to, the

purchase and sales of securities in portfolio companies.

12. Abraaj Investment Management was the Manager and Investment Adviser to the

Abraaj Health Fund.  Abraaj Investment Management and Naqvi advised the Fund as to the

specific portfolio companies to target, the value of those portfolio companies, and the

advisability of investing in, purchasing, and selling the securities of such portfolio companies.

Abraaj Investment Management and Naqvi controlled the purchase and sale of the portfolio

companies held by the Abraaj Health Fund.

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13. Throughout the Relevant Time period, Abraaj Investment Management and Naqvi

made investment decisions for the Abraaj Heath Fund through a committee called the Global

Investment Committee (“GIC”).  The GIC evaluated and recommended investment opportunities

to the Abraaj Group’s private equity funds, including the Abraaj Health Fund, as well as

monitored the performance of their investments, and, when appropriate, developed and

recommended disposition strategies.  The GIC was a committee of up to seven members, five of

which were permanent.  Naqvi was the GIC’s Chairman throughout the Relevant Period.  The

GIC’s investment decisions required a unanimous vote, but Naqvi, as Chairman, had veto power

and also could override one dissenting vote.

14. Abraaj Investment Management and Naqvi received compensation for their

investment adviser services to the Abraaj Heath Fund.

15. As the Abraaj Health Fund’s investment advisers, Abraaj Investment

Management and Naqvi owed fiduciary duties to the Fund.

II. Abraaj Investment Management And Naqvi Misappropriated Over $230 Million
From The Abraaj Health Fund

16. The Abraaj Health Fund was a private equity fund formed as a limited partnership

in 2015, and managed by Abraaj Investment Management and Naqvi.  The Fund’s largest

investor was based in this District, and other United States-based investors were among the

limited partners, including a large charitable foundation and several other charitable

organizations.  The Fund was formed to primarily make investments in the securities of health

care-related businesses such as hospitals and treatment centers in emerging markets.

17. According to the HFLPA, Abraaj Investment Management was authorized to take

all necessary or desirable actions in connection with the operation of the Fund, the management

of the Fund’s investment portfolio or otherwise in the furtherance of the Fund’s business.  In

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accordance with these directives, Abraaj Investment Management was entitled to (i) drawdown

limited partner capital commitments to make specific investments for the fund; (ii) collect Fund

expenses not to exceed $2.5 million; and (iii) receive an adviser or management fee equal to two

per cent per annum of the commitment of each such investor.  The HFLPA also required that

Abraaj Investment Management refer all actual or potential conflicts of interest to the LPAC.

18. Naqvi had signatory authority on all Abraaj Health Fund Bank Accounts, as well

as Abraaj Holdings’ and Abraaj Investment Management’s bank accounts.  Pursuant to this

authority, Naqvi was a required signatory on all transfers in excess of $75 million.

19. The General Partner periodically issued drawdown notices to investors that

informed each investor of the amount of their committed capital that was being drawn down,

where to send the drawn down funds, and how their investment would be used.  For example, in

November 2016, and in March 2017, the General Partner provided notices of drawdowns totaling

$415 million and $115 million, respectively, that it claimed would be used to fund specific

portfolio company transactions, fees, and expenses.

20. According to Abraaj Investment Management’s Quarterly Report to investors for

the third quarter of 2017, the limited partners paid approximately $544 million in capital

contributions pursuant to drawdowns.  According to the report, however, Abraaj Investment

Management had invested only approximately $265 million in Fund portfolio companies, leaving

hundreds of millions of capital uninvested and still available for the Fund’s use.  It also informed

investors that the Abraaj Health Fund had, to date, paid Abraaj Investment Management $37.6

million in management fees and $2.5 million in expenses.

21. Abraaj Investment Management’s emails, bank records, and internal finance

documents, however, reflect that Defendants were not using the Abraaj Health Fund’s money as

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required by the HFLPA, as described in the Fund’s written disclosures to investors, and in the

investor drawdown notices.  Instead, Abraaj Investment Management and Naqvi were

identifying and acknowledging that Abraaj Holdings and Abraaj Investment Management were

suffering significant cash shortfalls, and then misappropriating Fund money to cover the

shortfalls and pay for items such as Abraaj Holdings’ debt obligations.  These material facts were

not disclosed to the Fund, its investors, or the LPAC in the Abraaj Investment Management’s

Quarterly Reports, the Fund’s audited financial statements, or otherwise.

A. By December 2016, Abraaj Investment Management and Naqvi Began to
Misappropriate Money from the Abraaj Health Fund

22. In December 2016, Abraaj Investment Management transferred $100 million of

Abraaj Health Fund money from an Abraaj Health Fund Bank Account to an Abraaj Holdings

bank account, and $40 million to an Abraaj Investment Management bank account.  These

transfers were in addition to the management fees and expense reimbursements to which Abraaj

Investment Management was entitled.  As a required signatory for all bank transfers over $75

million, Naqvi at least approved the $100 million transfer to Abraaj Holdings.

23. On January 3, 2017, the Abraaj Group’s Managing Director of Finance

(“Managing Director”) informed Naqvi and the Abraaj Group’s Head of Finance and Operations

(“Finance Head”) by email that Abraaj Holdings was expected to have a cash shortfall of $85

million by the end of March 2017.  The Managing Director noted that this cash shortfall would

occur despite the $140 million recently taken from the Abraaj Health Fund, which he described

in the email as $128.5 million “borrowed” from the Abraaj Health Fund, and an $11.5 million

“receivable” involving Abraaj Holdings.  Neither the loan nor the receivable were disclosed to

the Fund, its investors, or the LPAC on Abraaj Investment Management’s Quarterly Report to

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Abraaj Health Fund investors for the fourth quarter of 2016, the Fund’s audited financial

statements for the period ending June 30, 2017, or otherwise.

24. The Managing Director further noted in his January 3, 2017 email that the Abraaj

Health Fund’s cash requirements for the first quarter of 2017 were approximately $173 million if

it included all investments identified in Abraaj Investment Management’s prior drawdown

notices to investors.  The Managing Director, however, noted that the Abraaj Health Fund only

had an available balance of $111.5 million.  Despite this approximately $62 million shortfall, the

Managing Director did not recommend that they return the $140 million already misappropriated

by Abraaj Holdings and Abraaj Investment Management.

25. On January 19, 2017, Naqvi responded that he had not had time to review the

Managing Director’s analysis, but he authorized the Managing Director and the Finance Head to

use “their common sense to process and just don’t shut down the business!”  Naqvi also

promised to discuss later when he became available.

26. On February 16, 2017, the Managing Director emailed Naqvi and the Finance

Head a portion of Abraaj Holdings’ cash balance spreadsheet, and he concluded that the Abraaj

Group would have a cash shortfall of $4.2 million that month and so they would draw $5 million

from the Abraaj Health Fund to cover it.  The email also included a capital contribution

drawdown chart for the Abraaj Health Fund demonstrating that the $140 million that had been

transferred from the Abraaj Health Fund to Abraaj Investment Management and Abraaj Holdings

in December 2016, remained outstanding.  The Managing Director further noted that the next

Abraaj Health Fund investor drawdown would occur around the end of the first quarter of 2017.

27. On or about March 15, 2017, the General Partner sent investors a drawdown

notice requesting an additional $115 million from the Abraaj Health Fund limited partners,

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claiming the money would fund five portfolio company investments – even though Abraaj

Investment Management had already misappropriated well in excess of that amount.

Furthermore, the drawdown notice named these investments as “follow-on investments,” but

internal Abraaj Group financial documents and bank records reflect that, by March 15, 2017,

Abraaj Investment Management had, in fact, only sent funds to two of these five portfolio

companies.

28. In addition, on or about March 15, 2017, Abraaj Investment Management

transferred another $8 million of Abraaj Health Fund investor money from an Abraaj Health

Fund Bank Account to an Abraaj Investment Management bank account.  These funds did not

constitute Abraaj Investment Management’s fees or expenses to which it was entitled pursuant to

the HFLPA.

29. Nor did Abraaj Holdings or Abraaj Investment Management return the previously

misappropriated money to the Abraaj Health Fund.  Rather, between March 21 and March 30,

2017, Abraaj Investment Management transferred another $16 million from an Abraaj Health

Fund Bank Account to an Abraaj Investment Management bank account.  These funds did not

constitute Abraaj Investment Management’s fees or expenses to which it was entitled pursuant to

the HFLPA.

30. Abraaj Investment Management’s March 2017 transfers totaling $24 million in

Abraaj Health Fund money were not disclosed to the Fund, its investors, or the LPAC in Abraaj

Investment Management’s Quarterly Reports to investors for the first quarter of 2017, the Fund’s

audited financial statements for the period ending June 30, 2017, or otherwise.  Abraaj

Investment Management’s Quarterly Report for the first quarter of 2017, reported that it received

only $4.2 million in management fees and had no Fund expenses in that quarter.

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31. On or about June 3, 2017, the Managing Director reported to Naqvi and the

Finance Head that Abraaj Holdings and Abraaj Investment Management expected to have a $255

million payable to the Abraaj Health Fund by the end of the fiscal period ending June 30, 2017.

32. On September 12, 2017, the Managing Director sent Naqvi and the Finance Head

an Abraaj Group a cash flow update by email, noting that a $68 million drawdown of investor

funds from the Abraaj Health Fund would be available to cover Abraaj Holdings’ and Abraaj

Investment Management’s upcoming expenses, including Abraaj Holdings’ debt obligations.

33. In the September 12, 2017 email, the Managing Director further informed Naqvi

that the Abraaj Group’s expenses that he identified did not include $58 million needed to fund

investments in three portfolio companies for the Abraaj Health Fund in October 2017.  Instead,

the Managing Director asked Naqvi to assist him by “delaying these deals” so that the money

could be used for non-Abraaj Health Fund expenses.  Abraaj Group internal financial documents

and bank statements reflect that the Abraaj Health Fund’s investments in these three portfolio

companies were, in fact, delayed past October 2017.

34. In total, from December 2016, through at least September 2017, Abraaj

Investment Management – with the knowledge and authorization of Naqvi – transferred at least

$230 million from Abraaj Health Fund Bank Accounts to Abraaj Holdings and Abraaj

Investment Management that was not authorized pursuant to the HFLPA.  This money was

comingled with other Abraaj Holdings’ and Abraaj Investment Management’s funds and used as

needed for Abraaj Holdings’ and Abraaj Investment Management’s corporate expenses or other

non-Abraaj Health Fund purposes.

35. The HFLPA did not authorize these transfers from the Abraaj Health Fund to

Abraaj Holdings and Abraaj Investment Management.  Rather, contrary to the HFLPA, Abraaj

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Investment Management’s undisclosed transfers of investor funds from the Abraaj Health Fund

to itself and to Abraaj Holdings to cover their cash shortfalls were not related to the operation of

the Fund, the management of the Fund’s investment portfolio, or otherwise in the furtherance of

the Fund’s business.  Further, those transfers far exceeded the $37.6 million in management fees

and $2.5 million in expenses that Abraaj Investment Management disclosed to investors in its

Quarterly Manager’s Report for the third quarter of 2017.

36. By conduct including, but not necessarily limited to that described above, Naqvi

knew, authorized, directed, and permitted the Managing Director and others to go forward with

keeping his businesses – Abraaj Holdings and Abraaj Investment Management – afloat when he

knew, was reckless in not knowing, or should have known that Abraaj Health Fund money was

used and would be used to fund the cash shortfalls at Abraaj Holdings and Abraaj Investment

Management.  Abraaj Investment Management’s and Naqvi’s misappropriations of Fund money

were not in the best interests of the Fund because, among other things, Fund investments were

delayed due to the misappropriations, and the misappropriations created investment risks not

disclosed to the Fund, its investors, or the LPAC.  In addition, Abraaj Investment Management’s

and Naqvi’s misappropriations of Fund money constituted conflicts of interest and related party

transactions between themselves and their client, the Fund, which they failed to disclose to the

Fund, its investors, or the LPAC in violation of the HFLPA.  By these actions and omissions,

Abraaj Investment Management and Naqvi breached their fiduciary duties to the Fund.

B. Abraaj Investment Management and Naqvi Took Affirmative Steps to
Conceal Their Misappropriations

37. Abraaj Investment Management and Naqvi also took affirmative steps to conceal

their misappropriations from investors.  One incident occurred in connection with the Fund’s

initial audited financial statements for the period ending June 30, 2017.  On June 3, 2017, the

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Managing Director emailed Naqvi and the Finance Head regarding the upcoming audit for the

Abraaj Health Fund, Abraaj Holdings, and other related entities, and noted several “potential

audit issues” to discuss in their upcoming meeting on June 10, 2017.  Among other things, the

Managing Director reported to Naqvi and the Finance Head that Abraaj Holdings and Abraaj

Investment Management expected to have a $225 million payable to the Abraaj Health Fund at

fiscal period end and would have to “arrange for cash for . . . [the Abraaj Health Fund] audit.”

Naqvi and the Managing Director, copying the Finance Head, then considered, as an alternative,

whether they could change the Abraaj Health Fund’s fiscal period end to December 31, 2017, to

avoid having to release audited financial statements for another six months.  The Managing

Director, however, concluded that they could not change the date.

38. Ultimately, the Abraaj Health Fund’s audited financial statements for the period

ending June 30, 2017, reported that the Fund had $167 million in cash in an Abraaj Health Fund

Bank Account.  The financial statements further reported that this amount consisted of the

uninvested capital drawdowns from the Fund’s limited partners.

39. The $167 million cash balance, however, was, in fact, part of a $196 million loan

from a non-United States publicly traded airline (“Airline”) in which Naqvi served as a director.

On June 24, 2017, the Airline made a short-term 30-day loan to the General Partner that was

used to cover the hole in the Fund’s balance sheet left by the transfer of Fund money to Abraaj

Holdings and Abraaj Investment Management earlier in the year.  Naqvi also signed the loan

agreement because he personally guaranteed the repayment of the loan.

40. On July 19, 2017, which was shortly after the Fund’s June 30, 2017 period-end,

Abraaj Investment Management and Naqvi authorized the transfer of $196 million back to the

Airline, which left only about $28 million in the Abraaj Health Fund Bank Account.  Naqvi

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authorized at least this transfer because he was a required signatory on all transfers over $75

million.

41. Defendants also made misleading statements directly to Abraaj Health Fund

investors.  By October 2017, Abraaj Health Fund investors were raising concerns with Abraaj

Investment Management about the whereabouts of their capital contributions, as they had

contributed $544 million, but only approximately $265 million had actually been invested.  For

example, on October 15, 2017, the Chief Financial Officer of the Abraaj Health Fund emailed

the Abraaj Health Fund’s LPAC, which included United States investors, and represented that, at

the time, the Abraaj Health Fund had “an available cash balance” of $225.9 million in uninvested

funds in its bank accounts.  That statement was false; at the time, there was only approximately

$13 million in Abraaj Health Fund Bank Accounts.

42. On or around October 22, 2017, Naqvi emailed a large United States investor who

raised questions regarding the location of the Abraaj Health Fund’s uninvested capital, and

Naqvi claimed that Abraaj Investment Management had “decided to keep the uninvested

amounts with us” and “keep[] the drawn funds in place” as they await to deploy capital to

investments that Naqvi claimed were “slightly delayed for reasons beyond our control.”  Naqvi’s

statements were misleading because (1) the money was not in the Abraaj Health Fund Bank

Accounts, but had been transferred to Abraaj Holdings and Abraaj Investment Management; and

(2) Naqvi had purposely delayed funding three Abraaj Health Fund investments rather than

return the misappropriated Fund money from Abraaj Holdings and Abraaj Investment

Management.

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43. In or around February 2018, Naqvi admitted to the head of investments at one

United States investor that Abraaj Health Fund capital contributions were used for Abraaj

Holdings’ and Abraaj Investment Management’s general corporate purposes.

44. In or around February 2018, Abraaj Investment Management falsely claimed to a

consultant hired by Abraaj Health Fund investors, including United States investors, that the

misappropriated money alleged in this Complaint were “Temporary Investments” as permitted

by the HFLPA.  They were not.  Abraaj Investment Management and Naqvi transferred the Fund

money to Abraaj Holdings and Abraaj Investment Management and used for non-Health Fund-

related purposes without any regard for being returned to investors when needed in furtherance

of the Fund’s investments.  Indeed, Abraaj Investment Management chose to either drawdown

additional investor funds or otherwise delay investments rather than repay monies owed to the

Fund.  Further, neither Abraaj Investment Management’s Quarterly Reports nor the Fund’s

audited financials disclosed any demand deposit accounts or any interest paid on such accounts.

Abraaj Holdings’ and Abraaj Investment Management’s internal financial records also did not

track any interest that Abraaj Holdings was purportedly paying on these accounts until on or

around January 2018 – after investors raised questions about Abraaj Investment Management’s

use of Fund money.

45. In late 2017 and early 2018, following months of investor demands with regard to

the location of their cash capital contributions, Abraaj Investment Management ultimately

returned much of the money it misappropriated, as well as over $13 million in interest to the

Abraaj Health Fund investors.

46. Naqvi knew, was reckless in not knowing, or should have known that using

Abraaj Health Fund money to fund cash shortfalls at Abraaj Holdings and Abraaj Investment

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Management and failing to disclose these cash transfers and the conflicts of interest that they

created in Abraaj Investment Management’s 2016 and 2017 Quarterly Reports, the Fund’s

audited financial statements, or otherwise, deceived and defrauded the Fund and its investors.

By reason of Naqvi’s knowledge, or his reckless or negligent disregard of the transfers of Abraaj

Health Fund money to cover Abraaj Holdings’ and Abraaj Investment Management’s cash flow

shortfalls, and Defendants’ failure to disclose such transfers in Abraaj Investment Management’s

2016 and 2017 Quarterly Reports, the Fund’s audited financial statements, or otherwise, Abraaj

Investment Management and Naqvi knowingly, recklessly, or negligently breached their

fiduciary duties to the Abraaj Health Fund, and deceived and defrauded the Fund and its

investors.

47. Defendants’ knowledge, or reckless or negligent disregard of their transfers of

Abraaj Health Fund money to cover Abraaj Holdings’ and Abraaj Investment Management’s

cash flow shortfalls and failure to disclose the transfers and the conflicts of interest they created

were materially deceptive acts to the Fund and its investors, and Defendants’ failure to disclose

such transfers in the Abraaj Investment Management’s Quarterly Reports, the Fund’s audited

financial statements, or otherwise, constituted material omissions to the Fund and its investors.

FIRST CLAIM FOR RELIEF

Violations of Section 206(1) of the Advisers Act
(Against Abraaj Investment Management and Naqvi)

48. The Commission realleges and incorporates by reference each and every

allegation contained in Paragraphs 1 through 47 of this Complaint as if fully set forth herein.

49. By engaging in the acts and conduct alleged in this Complaint, during the

Relevant Period, Abraaj Investment Management and Naqvi were acting as investment advisers

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to the Abraaj Health Fund within the meaning of Section 202(11) of the Advisers Act, 15 U.S.C.

§ 80b-2(11) because they were persons who, for compensation, engaged in the business of

advising others, either directly or through publications or writings, as to the value of securities or

as to the advisability of investing in, purchasing, or selling securities.

50. By engaging in the acts and conduct alleged in this Complaint, Abraaj Investment

Management and Naqvi, directly or indirectly, singularly or in concert, by use of the mails or

means and instrumentalities of interstate commerce, while acting as investment advisers,

employed devices, schemes, or artifices to defraud any client or prospective client, with scienter.

51. As investment advisers, Abraaj Investment Management and Naqvi owed the

Abraaj Health Fund a fiduciary duty of utmost good faith and had an affirmative duty to make

full and fair disclosure to them of all material facts, as well as the duty to act in the Abraaj

Health Fund’s best interests, and not act in Abraaj Investment Management’s and Naqvi’s own

interest to the detriment of the Abraaj Health Fund.

52. Abraaj Investment Management and Naqvi breached their fiduciary duties to the

Abraaj Health Fund and engaged in fraudulent conduct that violated Section 206(1) of the

Advisers Act, 15 U.S.C. § 80b-6(1), by knowingly or recklessly misappropriating millions of

dollars of Fund money, failing to disclose to the Fund that the money had been transferred to

Abraaj Investment Management and Abraaj Holdings, and failing to disclose the conflicts of

interests they created.

53. By reason of the foregoing, Abraaj Investment Management and Naqvi have

violated, and unless enjoined will again violate, Section 206(1) of the Advisers Act, 15 U.S.C. §

80b-6(1).

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SECOND CLAIM FOR RELIEF

Violations of Section 206(2) of the Advisers Act
(Against Abraaj Investment Management and Naqvi)

54. The Commission realleges and incorporates by reference each and every

allegation contained in Paragraphs 1 through 47 of this Complaint as if fully set forth herein.

55. By engaging in the acts and conduct alleged in this Complaint, during the

Relevant Period, Abraaj Investment Management and Naqvi were acting as investment advisers

to the Abraaj Health Fund within the meaning of Section 202(11) of the Advisers Act, 15 U.S.C.

§ 80b-2(11), because they were persons who, for compensation, engaged in the business of

advising others, either directly or through publications or writings, as to the value of securities or

as to the advisability of investing in, purchasing, or selling securities.

56. By engaging in the acts and conduct alleged in this Complaint, Abraaj Investment

Management and Naqvi, directly or indirectly, singularly or in concert, by use of the mails or

means and instrumentalities of interstate commerce, while acting as investment advisers,

engaged in transactions, practices, or courses of business which operated as a fraud or deceit

upon any client or prospective client.

57. As investment advisers, Abraaj Investment Management and Naqvi owed the

Abraaj Health Fund a fiduciary duty of utmost good faith and had an affirmative duty to make

full and fair disclosure to them of all material facts, as well as the duty to act in the Abraaj

Health Fund’s best interests, and not act in Abraaj Investment Management’s and Naqvi’s own

interest to the detriment of the Abraaj Health Fund.

58. Abraaj Investment Management and Naqvi breached their fiduciary duties to the

Abraaj Health Fund and investors and engaged in transactions, practices, or courses of business

which operated as a fraud or deceit upon any client or prospective client that violated Section

19

206(2) of the Advisers Act, 15 U.S.C. §§ 80b-6(2), by misappropriating millions of dollars of

Fund money, failing to disclose to the Fund that the money had been transferred to Abraaj

Investment Management and Abraaj Holdings, and failing to disclose the conflicts of interests

they created.

59. By reason of the foregoing, Abraaj Investment Management and Naqvi have

violated, and unless enjoined will again violate, Section 206(2) of the Advisers Act, 15 U.S.C. §

80b-6(2).

THIRD CLAIM FOR RELIEF

Violations of Section 206(4) of the Advisers Act and Rule 206(4)-8 Thereunder
(Against Abraaj Investment Management and Naqvi)

60. The Commission realleges and incorporates by reference each and every

allegation contained in Paragraphs 1 through 47 of this Complaint as if fully set forth herein.

61. By engaging in the acts and conduct alleged in this Complaint, during the

Relevant Period, Abraaj Investment Management and Naqvi were acting as investment advisers

to the Abraaj Health Fund within the meaning of Section 202(11) of the Advisers Act, 15 U.S.C.

§ 80b-2(11), because they were persons who, for compensation, engaged in the business of

advising others, either directly or through publications or writings, as to the value of securities or

as to the advisability of investing in, purchasing, or selling securities.

62. The Abraaj Health Fund was a pooled investment vehicle within the meaning of

Rule 206(4)-8(b) of the Advisers Act, 17 C.F.R. § 275.206(4)-8(b).  It was engaged in, held itself

out as being engaged primarily, and proposed to engage itself primarily in the business of

investing, reinvesting, and/or trading in securities, and thus was an investment company as

defined in Section 3(a) of the Investment Company Act of 1940, 15 U.S.C. § 80a-3(a), or would

20

have been an investment company under that provision but for the exclusion provided from that

definition under either Section 3(c)(1) or Section 3(c)(7) of the Investment Company Act of

1940, 15 U.S.C. § 80a-3(c)(1) & (7).

63. By engaging in the acts and conduct alleged in this Complaint, Abraaj Investment

Management and Naqvi, while acting as investment advisers to the Abraaj Health Fund, which

was a pooled investment vehicle, by use of the means and instrumentalities of interstate

commerce and of the mails, (1) made untrue statements of material fact and omitted to state

material facts necessary to make statements made, in the light of the circumstances under which

they were made, not misleading, to investors and prospective investors in the pooled investment

vehicles; and (2) engaged in acts, practices, and courses of business that were fraudulent,

deceptive, and manipulative with respect to investors and prospective investors in pooled

investment vehicles.

64. By reason of the foregoing, Abraaj Investment Management and Naqvi have

violated, and unless enjoined will again violate, Section 206(4) of the Advisers Act, 15 U.S.C. §

80b-6(4), and Rule 206(4)-8(a) thereunder, 17 C.F.R. § 275.206(4)-8(a).

PRAYER FOR RELIEF

WHEREFORE, the Commission respectfully requests that this Court issue a Final

Judgment:

I.

 Finding that Defendants each violated the Federal securities laws and rules promulgated

thereunder as alleged against them in this Complaint.

II.

 Permanently enjoining Defendants and their agents, servants, employees and attorneys

and all persons in active concert or participation with them who receive actual notice of the

injunction by personal service or otherwise, and each of them, directly or indirectly, from

committing future violations of Section 206(1), (2), and (4) of the Advisers Act, 15 U.S.C. §§

80b-6(1), (2), & (4), and Rule 206(4)-8(b) thereunder, 17 C.F.R. § 275.206(4)-8(b).

III.

 Ordering Defendants to disgorge all ill-gotten gains, with prejudgment interest, as a result

of the conduct alleged in this Complaint.

IV.

 Ordering Defendants to pay civil monetary penalties pursuant to Section 209(e) o the

Advisers Act, 5 U.S.C. § 80b-209(e).

V.

 Granting such other and further relief as the Court may deem just and proper.

22

Dated:   April 11, 2019    Respectfully submitted,

        s/John D. Worland, Jr.
        John D. Worland, Jr. (JW-1962)

SECURITIES AND EXCHANGE
COMMISSION
100 F St., NE
Washington, DC 20549-5985
(202) 551-4438
[email protected]

Jan M. Folena (motion for admission pro
hac vice to be filed)
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
100 F St., NE
Washington, DC 20549-5985
(202) 551-4738
[email protected]

Matthew F. Scarlato (motion for admission
pro hac vice to be filed)
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
100 F St., NE
Washington, DC 20549-5985
(202) 551-3749
[email protected]

OF COUNSEL:

Dabney C. O’Riordan
SECURITIES AND EXCHANGE
COMMISSION
444 South Flower St., Suite 900
Los Angeles, CA  90071

David A. Becker
David A. Neuman
SECURITIES AND EXCHANGE
COMMISSION
100 F St., NE
Washington, D.C. 20549-5985

1 
 

UNITED STATES DISTRICT COURT 
SOUTHERN DISTRICT OF NEW YORK 
 
 
SECURITIES AND EXCHANGE 
COMMISSION, 

                                       Plaintiff, 

                  v. 

ABRAAJ INVESTMENT MANAGEMENT 
LIMITED, and ARIF NAQVI, 

                                      Defendants.  

 

 

No. 19-cv-3244 

COMPLAINT  

JURY TRIAL DEMANDED  

 

 

Plaintiff Securities and Exchange Commission (the “Commission”), for its Complaint 

against Abraaj Investment Management Limited (“Abraaj Investment Management”) and Arif 

Naqvi (“Naqvi”) (collectively “Defendants”), alleges as follows: 

SUMMARY OF ALLEGATIONS 
 

1. Abraaj Investment Management, an investment adviser operating in Dubai, 

United Arab Emirates (“UAE”), and its founder, Naqvi, defrauded the Abraaj Growth Markets 

Health Fund (“Abraaj Health Fund” or “Fund”) and United States investors by misappropriating 

over $230 million in Fund money from at least September 2016 until at least June 2018 

(“Relevant Period”).  While Abraaj Investment Management and Naqvi falsely reported to the 

Abraaj Health Fund and its investors that their money would be invested in health care-related 

businesses in emerging markets, Abraaj Investment Management – under Naqvi’s control – 

misappropriated the money to cover cash shortfalls at Abraaj Investment Management and its 

parent company, Abraaj Holdings Ltd. (“Abraaj Holdings”), a separate entity that Naqvi largely 

owned and controlled.     

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2 
 

2. Defendants’ materially false statements, omissions, and deceptive acts violated 

the anti-fraud provisions of the Investment Advisers Act of 1940, 15 U.S.C. §§ 80b-1-21.  The 

Commission respectfully requests, among other things, that the Court enjoin Defendants from 

committing further violations of the Federal securities laws as alleged in this Complaint, and 

order Defendants to pay disgorgement, plus prejudgment interest, and a monetary penalty based 

upon these violations. 

JURISDICTION AND VENUE 

3. The Court possesses jurisdiction over this action pursuant to Sections 209(d) and 

209(e) of the Advisers Act, 15 U.S.C. § 80b-9(d) & (e).   

4. Venue lies in this District pursuant to Section 214 of the Advisers Act, 15 U.S.C. 

§ 80b-14, because certain of the transactions, acts, practices and courses of conduct constituting 

the violations alleged herein occurred within the Southern District of New York.  Among other 

things, the Investor Relations Office that supported Abraaj Investment Management and the 

Abraaj Health Fund was located in this District, as well as the Fund’s largest United States 

investor.   

5. In connection with the unlawful conduct alleged in this Complaint, Defendants 

solicited and sold partnership interests in the Abraaj Health Fund to United States investors with 

whom Defendants maintained regular communication by providing, for example, false or 

materially misleading audited financial statements and Quarterly Reports.  United States 

investors were also members of the Fund’s Limited Partner Advisory Committee (“LPAC”) and 

attended committee meetings during the Relevant Period, including at least one LPAC meeting 

that occurred in this District.  These United States investors transmitted capital contributions to 

the Abraaj Health Fund from bank accounts in the United States, including at least one bank in 

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this District.  Defendants’ unlawful conduct abroad had a foreseeable substantial effect within 

the United States because the deceptive acts involved substantial sums of money contributed by 

United States investors, and Defendants transmitted misleading information to investors in the 

United States.  Further, Defendants made use of the means or instrumentalities of interstate 

commerce, and made use of the means or instruments of transportation or communication in 

interstate commerce, and of the mails.     

DEFENDANTS 

6. Abraaj Investment Management, an exempt reporting investment adviser with 

the Commission, is a UAE-based and Cayman Islands-incorporated exempted, limited liability 

company, and wholly owned subsidiary of Abraaj Holdings.  Abraaj Investment Management is 

the Investment Adviser and Manager to, among other private equity funds, the Abraaj Health 

Fund.  Abraaj Investment Management voluntarily declared bankruptcy and entered liquidation 

proceedings in or around June 2018, in the Grand Court of the Cayman Islands.  

7. Naqvi, age 59, is a Pakistani national.  He is the founder and largest owner of 

Abraaj Holdings, which is the sole owner of Abraaj Investment Management.  Naqvi exercised 

substantial control over Abraaj Holdings, Abraaj Investment Management, and the Abraaj Health 

Fund.  According to the Abraaj Health Fund’s private placement memorandum, Naqvi was the 

“Head of the Fund” who “led the design of the [Fund] concept and the strategy and business 

plan,” and was one of two senior executives responsible for “overseeing the Fund’s activities.”  

During the Relevant Period, Naqvi was paid substantial sums from Abraaj Holdings and Abraaj 

Investment Management.   

 

 

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RELEVANT ENTITIES 

8. Abraaj Group was the informal name for a large group of related entities 

consisting of private equity funds, their general partners, investment advisers, and other entities 

that Naqvi founded in 2002, and included Abraaj Holdings and Abraaj Investment Management.  

As of 2018, the Abraaj Group reportedly managed over $13 billion in numerous private equity 

and other funds that were typically structured as limited partnerships that included United States 

investors.   

9. Abraaj Holdings is a UAE-based, Cayman Islands-incorporated exempted 

limited liability company that Naqvi founded in 2002.  Naqvi was its largest owner.  It serves as 

the Abraaj Group’s top-level holding company and owns numerous entities, including Abraaj 

Investment Management, other investment adviser entities, and certain private equity funds’ 

general partners.  Abraaj Holdings also has limited partnership interests in Abraaj Group-

managed funds, and portions of some of the funds’ investment portfolio companies.  Abraaj 

Holdings voluntarily declared bankruptcy and entered liquidation proceedings in or around June 

2018, in the Grand Court of the Cayman Islands.  

10. Abraaj Health Fund is a private equity fund registered in the Cayman Islands.  It 

was structured as a limited partnership formed to invest in businesses operating in the healthcare 

and related sectors in emerging markets.  Abraaj Investment Management owned and controlled 

the Fund’s general partner (“General Partner”).  The Abraaj Health Fund’s first investor closing 

date was on September 30, 2015, and its final close was on July 31, 2016, with a total 

commitment of $850 million by, among others, United States investors who became limited 

partners in the Fund.  On August 18, 2017, a United States governmental entity committed an 

additional $150 million debt investment through a finance agreement.  The Abraaj Health Fund 

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had several bank accounts in the name of various entities it owned or controlled (“Abraaj Health 

Fund Bank Accounts”).  Abraaj Investment Management and Naqvi served as the Abraaj Health 

Fund’s investment adviser until mid-2018.  In Form D filings with the Commission, the Abraaj 

Health Fund claimed it was exempted from registration with the Commission because it was a 

pooled investment vehicle excluded from the definition of an “investment company” in the 

Investment Company Act of 1940, 15 U.S.C. §§ 80a-1-64, pursuant to Sections 3(c)(1) and 

3(c)(7) of the Act, 15 U.S.C. § 80a-3(c)(1) & (7).  

FACTUAL ALLEGATIONS 

I. Abraaj Investment Management And Naqvi Were Investment Advisers Who Owed 
Fiduciary Duties To The Abraaj Health Fund 
 
11. The Abraaj Health Fund was primarily engaged in, held itself out as being 

primarily engaged in, and proposed to engage itself primarily in the business of investing, 

reinvesting, and/or trading in securities.  According to the Abraaj Heath Fund limited partnership 

agreement (“HFLPA”), the “purpose of the [Abraaj Health Fund] is to carry on the business of 

an investor investing in a combination of control and minority investments in existing businesses 

and new businesses in the healthcare and related sectors,” including, but not limited to, the 

purchase and sales of securities in portfolio companies.    

12. Abraaj Investment Management was the Manager and Investment Adviser to the 

Abraaj Health Fund.  Abraaj Investment Management and Naqvi advised the Fund as to the 

specific portfolio companies to target, the value of those portfolio companies, and the 

advisability of investing in, purchasing, and selling the securities of such portfolio companies.  

Abraaj Investment Management and Naqvi controlled the purchase and sale of the portfolio 

companies held by the Abraaj Health Fund.   

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13. Throughout the Relevant Time period, Abraaj Investment Management and Naqvi 

made investment decisions for the Abraaj Heath Fund through a committee called the Global 

Investment Committee (“GIC”).  The GIC evaluated and recommended investment opportunities 

to the Abraaj Group’s private equity funds, including the Abraaj Health Fund, as well as 

monitored the performance of their investments, and, when appropriate, developed and 

recommended disposition strategies.  The GIC was a committee of up to seven members, five of 

which were permanent.  Naqvi was the GIC’s Chairman throughout the Relevant Period.  The 

GIC’s investment decisions required a unanimous vote, but Naqvi, as Chairman, had veto power 

and also could override one dissenting vote.    

14. Abraaj Investment Management and Naqvi received compensation for their 

investment adviser services to the Abraaj Heath Fund. 

15. As the Abraaj Health Fund’s investment advisers, Abraaj Investment 

Management and Naqvi owed fiduciary duties to the Fund.  

II. Abraaj Investment Management And Naqvi Misappropriated Over $230 Million 
From The Abraaj Health Fund 

 
16. The Abraaj Health Fund was a private equity fund formed as a limited partnership 

in 2015, and managed by Abraaj Investment Management and Naqvi.  The Fund’s largest 

investor was based in this District, and other United States-based investors were among the 

limited partners, including a large charitable foundation and several other charitable 

organizations.  The Fund was formed to primarily make investments in the securities of health 

care-related businesses such as hospitals and treatment centers in emerging markets.     

17. According to the HFLPA, Abraaj Investment Management was authorized to take 

all necessary or desirable actions in connection with the operation of the Fund, the management 

of the Fund’s investment portfolio or otherwise in the furtherance of the Fund’s business.  In 

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7 
 

accordance with these directives, Abraaj Investment Management was entitled to (i) drawdown 

limited partner capital commitments to make specific investments for the fund; (ii) collect Fund 

expenses not to exceed $2.5 million; and (iii) receive an adviser or management fee equal to two 

per cent per annum of the commitment of each such investor.  The HFLPA also required that 

Abraaj Investment Management refer all actual or potential conflicts of interest to the LPAC.  

18. Naqvi had signatory authority on all Abraaj Health Fund Bank Accounts, as well 

as Abraaj Holdings’ and Abraaj Investment Management’s bank accounts.  Pursuant to this 

authority, Naqvi was a required signatory on all transfers in excess of $75 million.  

19. The General Partner periodically issued drawdown notices to investors that 

informed each investor of the amount of their committed capital that was being drawn down, 

where to send the drawn down funds, and how their investment would be used.  For example, in 

November 2016, and in March 2017, the General Partner provided notices of drawdowns totaling 

$415 million and $115 million, respectively, that it claimed would be used to fund specific 

portfolio company transactions, fees, and expenses.   

20. According to Abraaj Investment Management’s Quarterly Report to investors for 

the third quarter of 2017, the limited partners paid approximately $544 million in capital 

contributions pursuant to drawdowns.  According to the report, however, Abraaj Investment 

Management had invested only approximately $265 million in Fund portfolio companies, leaving 

hundreds of millions of capital uninvested and still available for the Fund’s use.  It also informed 

investors that the Abraaj Health Fund had, to date, paid Abraaj Investment Management $37.6 

million in management fees and $2.5 million in expenses. 

21. Abraaj Investment Management’s emails, bank records, and internal finance 

documents, however, reflect that Defendants were not using the Abraaj Health Fund’s money as 

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8 
 

required by the HFLPA, as described in the Fund’s written disclosures to investors, and in the 

investor drawdown notices.  Instead, Abraaj Investment Management and Naqvi were 

identifying and acknowledging that Abraaj Holdings and Abraaj Investment Management were 

suffering significant cash shortfalls, and then misappropriating Fund money to cover the 

shortfalls and pay for items such as Abraaj Holdings’ debt obligations.  These material facts were 

not disclosed to the Fund, its investors, or the LPAC in the Abraaj Investment Management’s 

Quarterly Reports, the Fund’s audited financial statements, or otherwise.   

A. By December 2016, Abraaj Investment Management and Naqvi Began to 
Misappropriate Money from the Abraaj Health Fund 

 
22. In December 2016, Abraaj Investment Management transferred $100 million of 

Abraaj Health Fund money from an Abraaj Health Fund Bank Account to an Abraaj Holdings 

bank account, and $40 million to an Abraaj Investment Management bank account.  These 

transfers were in addition to the management fees and expense reimbursements to which Abraaj 

Investment Management was entitled.  As a required signatory for all bank transfers over $75 

million, Naqvi at least approved the $100 million transfer to Abraaj Holdings. 

23. On January 3, 2017, the Abraaj Group’s Managing Director of Finance 

(“Managing Director”) informed Naqvi and the Abraaj Group’s Head of Finance and Operations 

(“Finance Head”) by email that Abraaj Holdings was expected to have a cash shortfall of $85 

million by the end of March 2017.  The Managing Director noted that this cash shortfall would 

occur despite the $140 million recently taken from the Abraaj Health Fund, which he described 

in the email as $128.5 million “borrowed” from the Abraaj Health Fund, and an $11.5 million 

“receivable” involving Abraaj Holdings.  Neither the loan nor the receivable were disclosed to 

the Fund, its investors, or the LPAC on Abraaj Investment Management’s Quarterly Report to 

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9 
 

Abraaj Health Fund investors for the fourth quarter of 2016, the Fund’s audited financial 

statements for the period ending June 30, 2017, or otherwise. 

24. The Managing Director further noted in his January 3, 2017 email that the Abraaj 

Health Fund’s cash requirements for the first quarter of 2017 were approximately $173 million if 

it included all investments identified in Abraaj Investment Management’s prior drawdown 

notices to investors.  The Managing Director, however, noted that the Abraaj Health Fund only 

had an available balance of $111.5 million.  Despite this approximately $62 million shortfall, the 

Managing Director did not recommend that they return the $140 million already misappropriated 

by Abraaj Holdings and Abraaj Investment Management.   

25. On January 19, 2017, Naqvi responded that he had not had time to review the 

Managing Director’s analysis, but he authorized the Managing Director and the Finance Head to 

use “their common sense to process and just don’t shut down the business!”  Naqvi also 

promised to discuss later when he became available. 

26. On February 16, 2017, the Managing Director emailed Naqvi and the Finance 

Head a portion of Abraaj Holdings’ cash balance spreadsheet, and he concluded that the Abraaj 

Group would have a cash shortfall of $4.2 million that month and so they would draw $5 million 

from the Abraaj Health Fund to cover it.  The email also included a capital contribution 

drawdown chart for the Abraaj Health Fund demonstrating that the $140 million that had been 

transferred from the Abraaj Health Fund to Abraaj Investment Management and Abraaj Holdings 

in December 2016, remained outstanding.  The Managing Director further noted that the next 

Abraaj Health Fund investor drawdown would occur around the end of the first quarter of 2017. 

27. On or about March 15, 2017, the General Partner sent investors a drawdown 

notice requesting an additional $115 million from the Abraaj Health Fund limited partners, 

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10 
 

claiming the money would fund five portfolio company investments – even though Abraaj 

Investment Management had already misappropriated well in excess of that amount.  

Furthermore, the drawdown notice named these investments as “follow-on investments,” but 

internal Abraaj Group financial documents and bank records reflect that, by March 15, 2017, 

Abraaj Investment Management had, in fact, only sent funds to two of these five portfolio 

companies. 

28. In addition, on or about March 15, 2017, Abraaj Investment Management 

transferred another $8 million of Abraaj Health Fund investor money from an Abraaj Health 

Fund Bank Account to an Abraaj Investment Management bank account.  These funds did not 

constitute Abraaj Investment Management’s fees or expenses to which it was entitled pursuant to 

the HFLPA.    

29. Nor did Abraaj Holdings or Abraaj Investment Management return the previously 

misappropriated money to the Abraaj Health Fund.  Rather, between March 21 and March 30, 

2017, Abraaj Investment Management transferred another $16 million from an Abraaj Health 

Fund Bank Account to an Abraaj Investment Management bank account.  These funds did not 

constitute Abraaj Investment Management’s fees or expenses to which it was entitled pursuant to 

the HFLPA.   

30. Abraaj Investment Management’s March 2017 transfers totaling $24 million in 

Abraaj Health Fund money were not disclosed to the Fund, its investors, or the LPAC in Abraaj 

Investment Management’s Quarterly Reports to investors for the first quarter of 2017, the Fund’s 

audited financial statements for the period ending June 30, 2017, or otherwise.  Abraaj 

Investment Management’s Quarterly Report for the first quarter of 2017, reported that it received 

only $4.2 million in management fees and had no Fund expenses in that quarter. 

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31. On or about June 3, 2017, the Managing Director reported to Naqvi and the 

Finance Head that Abraaj Holdings and Abraaj Investment Management expected to have a $255 

million payable to the Abraaj Health Fund by the end of the fiscal period ending June 30, 2017.  

32. On September 12, 2017, the Managing Director sent Naqvi and the Finance Head 

an Abraaj Group a cash flow update by email, noting that a $68 million drawdown of investor 

funds from the Abraaj Health Fund would be available to cover Abraaj Holdings’ and Abraaj 

Investment Management’s upcoming expenses, including Abraaj Holdings’ debt obligations.   

33. In the September 12, 2017 email, the Managing Director further informed Naqvi 

that the Abraaj Group’s expenses that he identified did not include $58 million needed to fund 

investments in three portfolio companies for the Abraaj Health Fund in October 2017.  Instead, 

the Managing Director asked Naqvi to assist him by “delaying these deals” so that the money 

could be used for non-Abraaj Health Fund expenses.  Abraaj Group internal financial documents 

and bank statements reflect that the Abraaj Health Fund’s investments in these three portfolio 

companies were, in fact, delayed past October 2017.  

34. In total, from December 2016, through at least September 2017, Abraaj 

Investment Management – with the knowledge and authorization of Naqvi – transferred at least 

$230 million from Abraaj Health Fund Bank Accounts to Abraaj Holdings and Abraaj 

Investment Management that was not authorized pursuant to the HFLPA.  This money was 

comingled with other Abraaj Holdings’ and Abraaj Investment Management’s funds and used as 

needed for Abraaj Holdings’ and Abraaj Investment Management’s corporate expenses or other 

non-Abraaj Health Fund purposes.  

35. The HFLPA did not authorize these transfers from the Abraaj Health Fund to 

Abraaj Holdings and Abraaj Investment Management.  Rather, contrary to the HFLPA, Abraaj 

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Investment Management’s undisclosed transfers of investor funds from the Abraaj Health Fund 

to itself and to Abraaj Holdings to cover their cash shortfalls were not related to the operation of 

the Fund, the management of the Fund’s investment portfolio, or otherwise in the furtherance of 

the Fund’s business.  Further, those transfers far exceeded the $37.6 million in management fees 

and $2.5 million in expenses that Abraaj Investment Management disclosed to investors in its 

Quarterly Manager’s Report for the third quarter of 2017.  

36. By conduct including, but not necessarily limited to that described above, Naqvi 

knew, authorized, directed, and permitted the Managing Director and others to go forward with 

keeping his businesses – Abraaj Holdings and Abraaj Investment Management – afloat when he 

knew, was reckless in not knowing, or should have known that Abraaj Health Fund money was 

used and would be used to fund the cash shortfalls at Abraaj Holdings and Abraaj Investment 

Management.  Abraaj Investment Management’s and Naqvi’s misappropriations of Fund money 

were not in the best interests of the Fund because, among other things, Fund investments were 

delayed due to the misappropriations, and the misappropriations created investment risks not 

disclosed to the Fund, its investors, or the LPAC.  In addition, Abraaj Investment Management’s 

and Naqvi’s misappropriations of Fund money constituted conflicts of interest and related party 

transactions between themselves and their client, the Fund, which they failed to disclose to the 

Fund, its investors, or the LPAC in violation of the HFLPA.  By these actions and omissions, 

Abraaj Investment Management and Naqvi breached their fiduciary duties to the Fund.   

B. Abraaj Investment Management and Naqvi Took Affirmative Steps to 
Conceal Their Misappropriations 
  

37. Abraaj Investment Management and Naqvi also took affirmative steps to conceal 

their misappropriations from investors.  One incident occurred in connection with the Fund’s 

initial audited financial statements for the period ending June 30, 2017.  On June 3, 2017, the 

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Managing Director emailed Naqvi and the Finance Head regarding the upcoming audit for the 

Abraaj Health Fund, Abraaj Holdings, and other related entities, and noted several “potential 

audit issues” to discuss in their upcoming meeting on June 10, 2017.  Among other things, the 

Managing Director reported to Naqvi and the Finance Head that Abraaj Holdings and Abraaj 

Investment Management expected to have a $225 million payable to the Abraaj Health Fund at 

fiscal period end and would have to “arrange for cash for . . . [the Abraaj Health Fund] audit.”  

Naqvi and the Managing Director, copying the Finance Head, then considered, as an alternative, 

whether they could change the Abraaj Health Fund’s fiscal period end to December 31, 2017, to 

avoid having to release audited financial statements for another six months.  The Managing 

Director, however, concluded that they could not change the date. 

38. Ultimately, the Abraaj Health Fund’s audited financial statements for the period 

ending June 30, 2017, reported that the Fund had $167 million in cash in an Abraaj Health Fund 

Bank Account.  The financial statements further reported that this amount consisted of the 

uninvested capital drawdowns from the Fund’s limited partners.   

39. The $167 million cash balance, however, was, in fact, part of a $196 million loan 

from a non-United States publicly traded airline (“Airline”) in which Naqvi served as a director.  

On June 24, 2017, the Airline made a short-term 30-day loan to the General Partner that was 

used to cover the hole in the Fund’s balance sheet left by the transfer of Fund money to Abraaj 

Holdings and Abraaj Investment Management earlier in the year.  Naqvi also signed the loan 

agreement because he personally guaranteed the repayment of the loan.  

40. On July 19, 2017, which was shortly after the Fund’s June 30, 2017 period-end, 

Abraaj Investment Management and Naqvi authorized the transfer of $196 million back to the 

Airline, which left only about $28 million in the Abraaj Health Fund Bank Account.  Naqvi 

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authorized at least this transfer because he was a required signatory on all transfers over $75 

million.  

41. Defendants also made misleading statements directly to Abraaj Health Fund 

investors.  By October 2017, Abraaj Health Fund investors were raising concerns with Abraaj 

Investment Management about the whereabouts of their capital contributions, as they had 

contributed $544 million, but only approximately $265 million had actually been invested.  For 

example, on October 15, 2017, the Chief Financial Officer of the Abraaj Health Fund emailed 

the Abraaj Health Fund’s LPAC, which included United States investors, and represented that, at 

the time, the Abraaj Health Fund had “an available cash balance” of $225.9 million in uninvested 

funds in its bank accounts.  That statement was false; at the time, there was only approximately 

$13 million in Abraaj Health Fund Bank Accounts.  

42. On or around October 22, 2017, Naqvi emailed a large United States investor who 

raised questions regarding the location of the Abraaj Health Fund’s uninvested capital, and 

Naqvi claimed that Abraaj Investment Management had “decided to keep the uninvested 

amounts with us” and “keep[] the drawn funds in place” as they await to deploy capital to 

investments that Naqvi claimed were “slightly delayed for reasons beyond our control.”  Naqvi’s 

statements were misleading because (1) the money was not in the Abraaj Health Fund Bank 

Accounts, but had been transferred to Abraaj Holdings and Abraaj Investment Management; and 

(2) Naqvi had purposely delayed funding three Abraaj Health Fund investments rather than 

return the misappropriated Fund money from Abraaj Holdings and Abraaj Investment 

Management.   

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43. In or around February 2018, Naqvi admitted to the head of investments at one 

United States investor that Abraaj Health Fund capital contributions were used for Abraaj 

Holdings’ and Abraaj Investment Management’s general corporate purposes.   

44. In or around February 2018, Abraaj Investment Management falsely claimed to a 

consultant hired by Abraaj Health Fund investors, including United States investors, that the 

misappropriated money alleged in this Complaint were “Temporary Investments” as permitted 

by the HFLPA.  They were not.  Abraaj Investment Management and Naqvi transferred the Fund 

money to Abraaj Holdings and Abraaj Investment Management and used for non-Health Fund-

related purposes without any regard for being returned to investors when needed in furtherance 

of the Fund’s investments.  Indeed, Abraaj Investment Management chose to either drawdown 

additional investor funds or otherwise delay investments rather than repay monies owed to the 

Fund.  Further, neither Abraaj Investment Management’s Quarterly Reports nor the Fund’s 

audited financials disclosed any demand deposit accounts or any interest paid on such accounts.  

Abraaj Holdings’ and Abraaj Investment Management’s internal financial records also did not 

track any interest that Abraaj Holdings was purportedly paying on these accounts until on or 

around January 2018 – after investors raised questions about Abraaj Investment Management’s 

use of Fund money.    

45. In late 2017 and early 2018, following months of investor demands with regard to 

the location of their cash capital contributions, Abraaj Investment Management ultimately 

returned much of the money it misappropriated, as well as over $13 million in interest to the 

Abraaj Health Fund investors.   

46. Naqvi knew, was reckless in not knowing, or should have known that using 

Abraaj Health Fund money to fund cash shortfalls at Abraaj Holdings and Abraaj Investment 

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Management and failing to disclose these cash transfers and the conflicts of interest that they 

created in Abraaj Investment Management’s 2016 and 2017 Quarterly Reports, the Fund’s 

audited financial statements, or otherwise, deceived and defrauded the Fund and its investors.  

By reason of Naqvi’s knowledge, or his reckless or negligent disregard of the transfers of Abraaj 

Health Fund money to cover Abraaj Holdings’ and Abraaj Investment Management’s cash flow 

shortfalls, and Defendants’ failure to disclose such transfers in Abraaj Investment Management’s 

2016 and 2017 Quarterly Reports, the Fund’s audited financial statements, or otherwise, Abraaj 

Investment Management and Naqvi knowingly, recklessly, or negligently breached their 

fiduciary duties to the Abraaj Health Fund, and deceived and defrauded the Fund and its 

investors. 

47. Defendants’ knowledge, or reckless or negligent disregard of their transfers of 

Abraaj Health Fund money to cover Abraaj Holdings’ and Abraaj Investment Management’s 

cash flow shortfalls and failure to disclose the transfers and the conflicts of interest they created 

were materially deceptive acts to the Fund and its investors, and Defendants’ failure to disclose 

such transfers in the Abraaj Investment Management’s Quarterly Reports, the Fund’s audited 

financial statements, or otherwise, constituted material omissions to the Fund and its investors.   

 

FIRST CLAIM FOR RELIEF 
 

Violations of Section 206(1) of the Advisers Act 
(Against Abraaj Investment Management and Naqvi) 

 
48. The Commission realleges and incorporates by reference each and every 

allegation contained in Paragraphs 1 through 47 of this Complaint as if fully set forth herein. 

49. By engaging in the acts and conduct alleged in this Complaint, during the 

Relevant Period, Abraaj Investment Management and Naqvi were acting as investment advisers 

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to the Abraaj Health Fund within the meaning of Section 202(11) of the Advisers Act, 15 U.S.C. 

§ 80b-2(11) because they were persons who, for compensation, engaged in the business of 

advising others, either directly or through publications or writings, as to the value of securities or 

as to the advisability of investing in, purchasing, or selling securities. 

50. By engaging in the acts and conduct alleged in this Complaint, Abraaj Investment 

Management and Naqvi, directly or indirectly, singularly or in concert, by use of the mails or 

means and instrumentalities of interstate commerce, while acting as investment advisers, 

employed devices, schemes, or artifices to defraud any client or prospective client, with scienter.  

51. As investment advisers, Abraaj Investment Management and Naqvi owed the 

Abraaj Health Fund a fiduciary duty of utmost good faith and had an affirmative duty to make 

full and fair disclosure to them of all material facts, as well as the duty to act in the Abraaj 

Health Fund’s best interests, and not act in Abraaj Investment Management’s and Naqvi’s own 

interest to the detriment of the Abraaj Health Fund.  

52. Abraaj Investment Management and Naqvi breached their fiduciary duties to the 

Abraaj Health Fund and engaged in fraudulent conduct that violated Section 206(1) of the 

Advisers Act, 15 U.S.C. § 80b-6(1), by knowingly or recklessly misappropriating millions of 

dollars of Fund money, failing to disclose to the Fund that the money had been transferred to 

Abraaj Investment Management and Abraaj Holdings, and failing to disclose the conflicts of 

interests they created. 

53. By reason of the foregoing, Abraaj Investment Management and Naqvi have 

violated, and unless enjoined will again violate, Section 206(1) of the Advisers Act, 15 U.S.C. § 

80b-6(1). 

 

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SECOND CLAIM FOR RELIEF 

Violations of Section 206(2) of the Advisers Act 
(Against Abraaj Investment Management and Naqvi) 

54. The Commission realleges and incorporates by reference each and every 

allegation contained in Paragraphs 1 through 47 of this Complaint as if fully set forth herein. 

55. By engaging in the acts and conduct alleged in this Complaint, during the 

Relevant Period, Abraaj Investment Management and Naqvi were acting as investment advisers 

to the Abraaj Health Fund within the meaning of Section 202(11) of the Advisers Act, 15 U.S.C. 

§ 80b-2(11), because they were persons who, for compensation, engaged in the business of 

advising others, either directly or through publications or writings, as to the value of securities or 

as to the advisability of investing in, purchasing, or selling securities.   

56. By engaging in the acts and conduct alleged in this Complaint, Abraaj Investment 

Management and Naqvi, directly or indirectly, singularly or in concert, by use of the mails or 

means and instrumentalities of interstate commerce, while acting as investment advisers, 

engaged in transactions, practices, or courses of business which operated as a fraud or deceit 

upon any client or prospective client.  

57. As investment advisers, Abraaj Investment Management and Naqvi owed the 

Abraaj Health Fund a fiduciary duty of utmost good faith and had an affirmative duty to make 

full and fair disclosure to them of all material facts, as well as the duty to act in the Abraaj 

Health Fund’s best interests, and not act in Abraaj Investment Management’s and Naqvi’s own 

interest to the detriment of the Abraaj Health Fund.  

58. Abraaj Investment Management and Naqvi breached their fiduciary duties to the 

Abraaj Health Fund and investors and engaged in transactions, practices, or courses of business 

which operated as a fraud or deceit upon any client or prospective client that violated Section 

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206(2) of the Advisers Act, 15 U.S.C. §§ 80b-6(2), by misappropriating millions of dollars of 

Fund money, failing to disclose to the Fund that the money had been transferred to Abraaj 

Investment Management and Abraaj Holdings, and failing to disclose the conflicts of interests 

they created. 

59. By reason of the foregoing, Abraaj Investment Management and Naqvi have 

violated, and unless enjoined will again violate, Section 206(2) of the Advisers Act, 15 U.S.C. § 

80b-6(2). 

 

THIRD CLAIM FOR RELIEF 

Violations of Section 206(4) of the Advisers Act and Rule 206(4)-8 Thereunder 
(Against Abraaj Investment Management and Naqvi) 

 
60. The Commission realleges and incorporates by reference each and every 

allegation contained in Paragraphs 1 through 47 of this Complaint as if fully set forth herein. 

61. By engaging in the acts and conduct alleged in this Complaint, during the 

Relevant Period, Abraaj Investment Management and Naqvi were acting as investment advisers 

to the Abraaj Health Fund within the meaning of Section 202(11) of the Advisers Act, 15 U.S.C. 

§ 80b-2(11), because they were persons who, for compensation, engaged in the business of 

advising others, either directly or through publications or writings, as to the value of securities or 

as to the advisability of investing in, purchasing, or selling securities.   

62. The Abraaj Health Fund was a pooled investment vehicle within the meaning of 

Rule 206(4)-8(b) of the Advisers Act, 17 C.F.R. § 275.206(4)-8(b).  It was engaged in, held itself 

out as being engaged primarily, and proposed to engage itself primarily in the business of 

investing, reinvesting, and/or trading in securities, and thus was an investment company as 

defined in Section 3(a) of the Investment Company Act of 1940, 15 U.S.C. § 80a-3(a), or would 

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have been an investment company under that provision but for the exclusion provided from that 

definition under either Section 3(c)(1) or Section 3(c)(7) of the Investment Company Act of 

1940, 15 U.S.C. § 80a-3(c)(1) & (7).  

63. By engaging in the acts and conduct alleged in this Complaint, Abraaj Investment 

Management and Naqvi, while acting as investment advisers to the Abraaj Health Fund, which 

was a pooled investment vehicle, by use of the means and instrumentalities of interstate 

commerce and of the mails, (1) made untrue statements of material fact and omitted to state 

material facts necessary to make statements made, in the light of the circumstances under which 

they were made, not misleading, to investors and prospective investors in the pooled investment 

vehicles; and (2) engaged in acts, practices, and courses of business that were fraudulent, 

deceptive, and manipulative with respect to investors and prospective investors in pooled 

investment vehicles. 

64. By reason of the foregoing, Abraaj Investment Management and Naqvi have 

violated, and unless enjoined will again violate, Section 206(4) of the Advisers Act, 15 U.S.C. § 

80b-6(4), and Rule 206(4)-8(a) thereunder, 17 C.F.R. § 275.206(4)-8(a). 

 
PRAYER FOR RELIEF 

WHEREFORE, the Commission respectfully requests that this Court issue a Final 

Judgment: 

I. 

 Finding that Defendants each violated the Federal securities laws and rules promulgated 

thereunder as alleged against them in this Complaint. 

 

 

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II. 

 Permanently enjoining Defendants and their agents, servants, employees and attorneys 

and all persons in active concert or participation with them who receive actual notice of the 

injunction by personal service or otherwise, and each of them, directly or indirectly, from 

committing future violations of Section 206(1), (2), and (4) of the Advisers Act, 15 U.S.C. §§ 

80b-6(1), (2), & (4), and Rule 206(4)-8(b) thereunder, 17 C.F.R. § 275.206(4)-8(b). 

III. 

 Ordering Defendants to disgorge all ill-gotten gains, with prejudgment interest, as a result 

of the conduct alleged in this Complaint.  

IV. 

 Ordering Defendants to pay civil monetary penalties pursuant to Section 209(e) o the 

Advisers Act, 5 U.S.C. § 80b-209(e). 

V. 

 Granting such other and further relief as the Court may deem just and proper. 

 

 

 

 

 

 

 

 

 

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Dated:   April 11, 2019    Respectfully submitted, 
 
 
        s/John D. Worland, Jr. 
        John D. Worland, Jr. (JW-1962) 

SECURITIES AND EXCHANGE 
COMMISSION 
100 F St., NE 
Washington, DC 20549-5985 
(202) 551-4438 
[email protected] 
 
Jan M. Folena (motion for admission pro 
hac vice to be filed) 
UNITED STATES SECURITIES AND 
EXCHANGE COMMISSION 
100 F St., NE 
Washington, DC 20549-5985 
(202) 551-4738 
[email protected] 
 
Matthew F. Scarlato (motion for admission 
pro hac vice to be filed) 
UNITED STATES SECURITIES AND 
EXCHANGE COMMISSION 
100 F St., NE 
Washington, DC 20549-5985 
(202) 551-3749 
[email protected] 
 
 

OF COUNSEL:  
  

Dabney C. O’Riordan 
SECURITIES AND EXCHANGE  
COMMISSION 
444 South Flower St., Suite 900 
Los Angeles, CA  90071 
 
David A. Becker 
David A. Neuman 
SECURITIES AND EXCHANGE  
COMMISSION 
100 F St., NE 
Washington, D.C. 20549-5985 

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