Timur Turlov: Hindenburg attack did not reduce investor confidence in Freedom Holding
12:32 - 13 October 2023
Two months after short sellers attempted to undermine investor confidence in Freedom Holding Corp. (FRHC), the company's CEO and founder Timur Turlov spoke about the aftermath of the attack and what steps the company is taking to protect itself from reputational risks in the future, in an interview published on KYPCNB.
Hindenburg Research, a short-selling investment research company, on August 15 published a report, accusing Freedom Holding Corp., of violating sanctions, falsifying earnings and manipulating the market. The NASDAQ-listed FRHC stock lost 3.2% on the day of the report publication, but recovered by 15% three days later. A week later, the S&P international rating agency affirmed its ratings of Freedom Holding Corp.
Turlov called Hindenburg's information attack "ill motivated" and said it did not lead to a decrease in investor confidence in Freedom Holding Corp.
“Our operating performance has not been affected. This is evident from the current regulatory reports of our investment business and Freedom Bank. Our retail deposits have not declined. We have preserved the trust of our key counterparties, all our key clients, preventing negative developments largely because we have been working on managing such risks for a very long time", said the head of the company.
According to Turlov, the bear attack has generated understandable regulatory interest in Freedom Holding Corp. and the company's legal team is responding promptly to all government enquiries regarding its operations.
“It seems that just about every regulator in the world came to us back in the summer, as public accusations require appropriate checks. It is the duty of regulators to verify allegations, however unreasonable they may be", he said. “According to our US lawyers at Morgan Lewis, who have seen many such checks, we have a very strong position”.
The market's subdued reaction to Hindenburg's release proves that the report did not convince investors, and an objective review by regulators would help the company finally stop speculation, said the head of Freedom Holding Corp.
“In this sense, the information attack was not successful: one cannot simply impose sanctions against a US holding company based on a clearly ill motivated media publication. In a democratic culture, regulators do not make decisions based on denunciations, they request information and check the facts. This is what the Western legal system is famous for: just because there is an investigation, it doesn't mean they will necessarily punish you. So the legal team always has the opportunity to get to the bottom of things”.
As a public company that has been traded on the NASDAQ exchange since 2019, Freedom Holding Corp. publishes required reports and co-operates with regulators but has never received any serious complaints as a result of audits, Turlov said. “We have been doing this for many years and have never received any accusations from Western regulators. And we have been on NASDAQ for four years and public in the US for over six years”.
“In addition to Freedom Holding Corp.'s large and strong compliance team and lawyers from Morgan Lewis, we brought in an independent forensic investigator to look into the allegations set out in the Hindenburg report ”, Turlov said. “The procedure will take about a month, but we expect that all regulators will be satisfied with these analyses. Once these reviews are completed, in addition to the Deloitte report and local audits, it will answer all such questions."
Commenting on the company's accusation of circumventing sanctions, Turlov said Freedom Holding Corp. "has never worked with clients in violation of the sanctions regimes".
“With a client base of hundreds of thousands of people, only a few ended up on the sanctions lists after we had established business relations with them. Absolutely all transactions with these clients have always strictly complied with the legal requirements, including OFAC licences", he added.
While legal and regulatory investigations are ongoing, the company continues its operations, focusing on developing new projects and ensuring continued growth of its digital platforms.
“The main conclusion I have drawn from this process is that the right communication strategy, transparency, professionalism, the best external auditors, compliance and lawyers are the best defence for a modern global company", said the head of Freedom Holding Corp.