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Freedom Holdings, which sold its Russian business last year during the ongoing Russia-Ukraine crisis, continues to do business with Russia, “flouting sanctions and anti-money laundering rules”, a latest Hindenburg report claims.
Online brokerage firm Freedom Holdings, with a market cap of $4.6 billion, was started in Moscow in 1998 before moving to Kazakhstan in 2022. The move came at a time when U.S. sanctions were announced against Russia during the start of the Ukraine-Russia conflict in 2022. At that time, the company sold it’s Russian business for $140 million to a Freedom Holdings employee, “in order to avoid sanctions”, the report said. But added that despite this, the firm continues to have strong ties in Russia.
The US-based Hindenburg is an investment research firm focusing on activist short selling. It has recently been in the news for its reports on India-based Adani Group and the US-based Nikola Group.
Also Read: Adani-Hindenburg case: Sebi seeks 15 days more from SC to file report
Freedom Holdings has been listed on Nasdaq since 2019. According to a latest annual report, Freedom Holdings’ revenue for the year ended March 31, 2023 was $795.7 million, up by 100% from two years earlier. The shares of the US-listed company fell by around 3 percent on Tuesday, August 15. Nasdaq had recently notified them of noncompliance for failing to submit its quarterly earnings report for the period ended June 30.
Workarounds
The Hindenburg report highlighted that the company recently admitted in its annual report to providing “brokerage services to certain individuals and entities who are subject to sanctions imposed by OFAC, the European Union, or the United Kingdom.” But according to the report, this not the first time Freedom Holdings has evaded sanctions. Previous instances include chairman and CEO Turlov establishing a private entity in Belize in 2014, during sanctions as a result of the 2014 Russia invasion of Ukrainian Crimea to help “Russians sidestep restrictions to access U.S. markets”. In 2015, it brought a bank from Vladimir Putin’s former chief of staff, who is a sanctioned Russian oligarch.
Freedom Finance has also continued to help divert funds from sanctioned banks, the report highlighted. In April 2022, after US sanctions were announced against Alfa Bank, resulting in freezing of assets, Freedom, according to the report, “openly advertised an easy-to-use service to help clients shift assets out of Alfa Bank”. Additionally, on August 11, 2023, four of Russia’s “financial elite” with connections to Alfa Group were sanctioned by the US Treasury. Similar situations were seen with VTB bank and Tinkoff Bank.
The report quoted former Freedom executives, who described the organisations as “unstructured” with blatant disregard for “regulations and rules and basically everything as much as this.” According to one former employee, “This is violating almost every country’s anti-money and anti-terrorist financing laws…I’ve personally seen suitcases with $2.5 million brought in cash by a client”.
Hawala trasactions
Multiple former employees interviewed for the report stated that, “Freedom Finance offices in Russia and Kazakhstan routinely channel clients into an opaque Belizean entity (FFIN Belize, which is now known as Freedom Security Trading) privately owned by Freedom’s CEO.” Freedom Security has contributed to around 25% of Freedom Finance’s revenue last year.
Similar instances have also been seen in UAE, the report added, quoting a former employee who worked at Freedom before it was incorporated in Dubai. According to the employee, Freedom moved cash out of Dubai using local, informal Hawala money transfer networks. Most of the clients, the employee said, were Russian or East European origin. Anyone who did not pass KYC and proof-of-funds checks was re-routed to open accounts at FFIN Belize.
A current Freedom Finance executive speaking to US-based CNBC has refuted these claims.
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