Hindenburg Research targets $4.6 billion Kazakh brokerage for allegedly helping Russian oligarchs evade sanctions

Hindenburg Research, the salient abbreviated seller that's stake against Jack Dorsey's Block, Carl Icahn and electrical conveyance startup Nikola, is present taking connected a $4.6 cardinal online brokerage based successful Kazakhstan.

Freedom Holding Corp. was founded successful Moscow successful 2008, earlier aboriginal moving to Kazakhstan, and listed connected the Nasdaq successful 2019. After Russia invaded Ukraine aboriginal past year, U.S. sanctions fundamentally severed ties betwixt American and Russian banks and companies. Freedom sold disconnected its Russian business.

But according to a study from Hindenburg connected Tuesday, those ties stay tight.

"We recovered that Freedom inactive does concern successful the Russian market, and that the institution has openly flouted sanctions on with anti-money laundering (AML) and know-your-customer (KYC) rules," the steadfast wrote.

Shares of Freedom Holding fell astir 3.3% connected Tuesday. Hindenburg's study came a time aft Freedom warned it was notified by Nasdaq of noncompliance for failing to taxable its quarterly net study for the play ended June 30.

In Freedom Holding's latest yearly report, the institution said gross for the twelvemonth ended March 31 was $795.7 million, up good implicit 100% from 2 years earlier.

At the bosom of the company's growth, Hindenburg alleged, was sanctions evasion, including 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 definite individuals and entities who are taxable to sanctions imposed by OFAC, the European Union oregon the United Kingdom."

According to Hindenburg, the occupation spell overmuch deeper.

The steadfast said it learned done interviews with aggregate erstwhile employees that lawsuit wealth ran from Freedom's offices successful Russia and Kazakhstan done a "Belizean entity privately owned by Freedom's CEO." SEC filings amusement that entity represented 60% of Freedom's interest and committee income for the twelvemonth ended March 31.

Freedom CEO Timur Turlov is 1 of the wealthiest men successful Kazakhstan, contempt being sanctioned by Ukraine for his fiscal ties to Russia.

One erstwhile elder enforcement alleged to Hindenburg that Russian wealth laundering was rampant. Regarding compliance standards, Hindenburg said the ex-employee described them arsenic "literally nothing."

"Just bring your money. There's nary root of income, root of funds. There's nary KYC. Nothing," the steadfast said, quoting the erstwhile employee. "The champion portion is this is violating astir each country's anti-money and anti-terrorist financing laws. They could bring cash. I've personally seen suitcases with $2.5 cardinal brought successful currency by a client."

The Belize entity, FFIN Belize, was established conscionable 4 months aft the U.S. sanctioned Russia successful 2014. Those sanctions, prompted by Russia's penetration of Crimea, created a occupation for Freedom's business, Hindenburg alleged.

Freedom's SEC filings from 2014 accidental FFIN Belize was designed to "provide easier entree to the U.S. securities markets than a Russian oregon Kazakhstan institution could provide."

A Freedom spokesperson, moving for an extracurricular steadfast successful the U.S., told CNBC that Hindenburg's allegations are "without merit."

"Freedom Holding and its subsidiaries proceed to supply each required disclosures to regulators and investors, who tin reappraisal our precocious filed signifier 10-K and and audited fiscal statements on our website," the typical said.

Freedom shares person been connected a teardrop the past fewer years, climbing much than eightfold since the extremity of 2018, mostly undeterred by planetary conflicts. The institution reported nett income of $205.6 cardinal successful fiscal 2023, with astir 79% coming from operations successful Kazakhstan.

Hindenburg, founded successful 2018, is known for taking abbreviated positions and publishing elaborate reports explaining the logic down its bets. The steadfast has wagered against Block (formerly Square), Icahn Enterprises, Gautam Adani's Adani Group, and Trevor Milton's Nikola.

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