Kazakhstan-based Freedom Holding is reportedly being utilized by Russian oligarchs to avoid sanctions and cleanse funds, as stated in a report by short seller Hindenburg Research. The firm, which is worth $4.6 billion, has a Belize-based offshore entity Hindenburg alleges is employed for money laundering.The share price of Freedom dipped a little on Tuesday, but has skyrocketed in recent times.
Hindenburg Research, the well-known short seller that has bet against Jack Dorsey's Block, Carl Icahn and electric vehicle startup Nikola, has now taken aim at Freedom Holding Corp., a $4.6 billion online brokerage based in Kazakhstan. Founded in Moscow in 2008 and listed on the Nasdaq in 2019, Freedom sold off its Russian business after the U.S. imposed sanctions amid the Russian invasion of Ukraine earlier last year. However, Hindenburg reported on Tuesday that ties to the country still remain strong. As a result, Freedom's shares dropped by 3.3%. This report came only a day after the company was notified by Nasdaq of its noncompliance to submit its quarterly earnings report.
In its filing for the year ended March 31, Freedom disclosed that its revenue had skyrocketed to $795.7 million from two years prior. Yet, according to Hindenburg, the source of this growth was sanctions evasion and disregard for anti-money laundering (AML) and know-your-customer (KYC) rules. Freedom CEO Timur Turlov, who has been sanctioned by Ukraine for his financial ties to Russia, is one of the wealthiest citizens of the nation. As such, Hindenburg uncovered via interviews with multiple former employees that client money ran from Freedom's offices in Russia and Kazakhstan through a Belizean entity privately owned by the CEO. Additionally, one of these former employees alleged to Hindenburg that Russian money laundering was widespread, and that compliance standards were virtually non-existent.
FFIN Belize was created four months after the U.S. imposed sanctions on Russia in 2014, in response to the latter's attack on Crimea. Per Freedom's 2014 SEC documents, FFIN Belize was created to allow for "easier access to the U.S. securities markets than a Russian or Kazakhstan company could provide". A representative from a U.S. external firm, speaking for Freedom, has stated that Hindenburg's allegations have no validity. The spokesperson further mentioned that Freedom is compliant with disclosure regulations and that relevant information is available on their website. Despite regional conflict affecting many countries, Freedom's shares have grown 8x since the end of 2018. The company reported a net income of $205.6 million in 2023, the majority of which was earned from operations in Kazakhstan.Hindenburg, created in 2018, is recognized for taking short positions and publishing detailed reports on the rationale behind its decisions. In the past, Hindenburg has shorted Block (formerly Square), Icahn Enterprises, Adani Group and Nikola.
Comments