Independent examination proves all accusations against Freedom Holding Corp. were false

Independent examination by Morgan, Lewis & Bockius LLP and Forensic Risk Alliance has proven that accusations against Freedom Holding Corp. presented in a report by Hindenburg Research were false, according to a press release by the holding.

The legal firm Morgan, Lewis & Bockius was established in the U.S. in 1873. It provides legal services in various economic sectors. Among the company’s pool of clients are transnational corporations from the Fortune 100. Forensic Risk Alliance has been working on the forensic audit and data analysis market for more than 20 years; it specializes in transborder and international investigations, compliance and legal proceedings.

This external examination was initiated by independent members of the holding’s board of directors to protect the interests of its shareholders. Four months were spent rigorously examining documents, visiting the company’s offices in Kazakhstan and Cyprus, analyzing data and testing, and interviewing employees and top executives. The auditors scrutinized the business operations of Freedom Holding Corp. subsidiaries, including Freedom Securities Trading, Inc. registered in Belize.

After the examination, the auditors concluded that the report by Hindenburg Research didn’t take into account some important factors and its accusations weren’t supported by proof. Despite accusations of using manipulative methods for boosting growth, Freedom’s business has organically grown over the past several years. All the holding’s subsidiaries have adopted compliance procedures that effectively prevent the breaching of sanctions from happening.

The auditors haven’t found any signs of the holding breaching sanctions or supporting cooperation with oligarchs under international sanctions. Also, there was no evidence that the holding used cash to put it into clients’ bank accounts (except for depositing money through bank cashiers) or manipulated its share price or the price of bonds by the Sustainable Development Fund of Kazakhstan.

Moreover, the auditors haven’t identified any evidence that the holding still controls the businesses in Russia that it sold at the beginning of last year to its top managers. Freedom Broker and Freedom Finance Global have never demanded their clients purchase the holding shares to obtain better conditions during IPOs of American companies. (For instance, to ensure bigger allocation while filing applications.)

However, during the inspection, the auditors made some recommendations to the holding executives aimed at improving compliance procedures and strengthening all those measures that have already been implemented.

In August 2023, Hindenburg Research released its investigation, where it accused Freedom Holding Corp. of breaching anti-Russian sanctions and falsifying financial reports. In an interview with Kursiv Timur Turlov, the founder and CEO of Freedom Holding Corp., denied all those accusations and assumed that a source for the Hindenburg Research report was a former employee of the holding.

Kursiv analyzed the situation and explained that the media outlet specializing in gathering compromising information against big companies is doing so in favor of short traders. Sometimes this can cause a short squeeze, a situation when a stock moves sharply higher, prompting traders who bet its price would fall to buy it to avoid greater losses. As a result, the stock value of a «victim company» goes up, which is exactly what happened with the holding’s share price; it rebounded after a sharp decline and then surged.

Hindenburg Research attacked various companies including Nikola Corporation, Clover Health Investments and Lordstown Motors Ltd. In early 2023, Hindenburg attacked Adani Group, a big holding in India controlled by Gautam Adani. Hindenburg accused the company of market manipulation and misuse of tax-haven jurisdictions. Analysts noticed that Adani Group has huge debt, while Citigroup refused to provide additional margin lending for the company. Adani Group called this investigation disinformation and a set of groundless accusations. A week after the attack, Adani Enterprises Limited, the holding structure of the group, lost 38% of its stock value and 62% within a month. However, the company’s share price has been gradually growing since April 2023. As of January 2024, it has nearly rebounded to the level before the attack.