Timur Turlov, CEO of Freedom Finance brokerage speaks to Reuters through the interview within the workplace in Moscow, Russia October 10, 2019.
Maxim Shemetov | Reuters
Hindenburg Research, the distinguished brief vendor that is guess in opposition to Jack Dorsey’s Block, Carl Icahn and electrical automobile startup Nikola, is now taking over a $4.6 billion on-line brokerage primarily based in Kazakhstan.
Freedom Holding Corp. was based in Moscow in 2008, earlier than later transferring to Kazakhstan, and listed on the Nasdaq in 2019. After Russia invaded Ukraine early final yr, U.S. sanctions primarily severed ties between American and Russian banks and corporations. Freedom offered off its Russian enterprise.
But in response to a report from Hindenburg on Tuesday, these ties stay tight.
“We found that Freedom still does business in the Russian market, and that the company has openly flouted sanctions along with anti-money laundering (AML) and know-your-customer (KYC) rules,” the agency wrote.
Shares of Freedom Holding fell about 4% on Tuesday. Hindenburg’s report got here a day after Freedom warned it was notified by Nasdaq of noncompliance for failing to submit its quarterly earnings report for the interval ended June 30.
In Freedom Holding’s newest annual report, the corporate stated income for the yr ended March 31 was $795.7 million, up properly over 100% from two years earlier.
At the center of the corporate’s development, Hindenburg alleged, was sanctions evasion, together with from the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC). Hindenburg highlighted Freedom’s acknowledgement to the SEC that it “provided brokerage services to certain individuals and entities who are subject to sanctions imposed by OFAC, the European Union or the United Kingdom.”
According to Hindenburg, the issue go a lot deeper.
The agency stated it realized by way of interviews with a number of former workers that shopper cash ran from Freedom’s workplaces in Russia and Kazakhstan by way of a “Belizean entity privately owned by Freedom’s CEO.” SEC filings present that entity represented 60% of Freedom’s price and fee revenue for the yr ended March 31.
Freedom CEO Timur Turlov is without doubt one of the wealthiest males in Kazakhstan, regardless of being sanctioned by Ukraine for his monetary ties to Russia.
One former senior govt alleged to Hindenburg that Russian cash laundering was rampant. Regarding compliance requirements, Hindenburg stated the ex-employee described them as “literally nothing.”
“Just bring your money. There’s no source of income, source of funds. There’s no KYC. Nothing,” the agency stated, quoting the previous worker. “The best part is this is violating almost every country’s anti-money and anti-terrorist financing laws. They could bring cash. I’ve personally seen suitcases with $2.5 million brought in cash by a client.”
Timur Turlov, CEO of Freedom Finance brokerage speaks to Reuters through the interview within the workplace in Moscow, Russia October 10, 2019.
Maxim Shemetov | Reuters
The Belize entity, FFIN Belize, was established simply 4 months after the U.S. sanctioned Russia in 2014. Those sanctions, prompted by Russia’s invasion of Crimea, created an issue for Freedom’s enterprise, Hindenburg alleged.
Freedom’s SEC filings from 2014 say FFIN Belize was designed to “provide easier access to the U.S. securities markets than a Russian or Kazakhstan company could provide.”
A Freedom spokesperson, working for an out of doors agency within the U.S., instructed CNBC that Hindenburg’s allegations are “without merit.”
“Freedom Holding and its subsidiaries continue to provide all required disclosures to regulators and investors, who can review our recently filed form 10-K and and audited financial statements on our website,” the consultant stated.
Freedom shares have been on a tear the previous few years, climbing greater than eightfold for the reason that finish of 2018, largely undeterred by world conflicts. The firm reported internet revenue of $205.6 million in fiscal 2023, with about 79% coming from operations in Kazakhstan.
Hindenburg, based in 2018, is thought for taking brief positions and publishing detailed stories explaining the logic behind its bets. The agency has wagered in opposition to Block (previously Square), Icahn Enterprises, Gautam Adani’s Adani Group, and Trevor Milton’s Nikola.
WATCH: Hindenburg Research goes after Carl Icahn
Source: www.cnbc.com”