Abu Dhabi authorities impose $12.46 million fines on firms, ban CEO for breaches, misconduct
The Abu Dhabi Global Market (ADGM) placed significant violations and penalties on the Hayvn Group of Companies, its former CEO Christopher Flinos, and associated parties for ‘serious regulatory breaches and misconduct.’ This was made clear by ADGM on Monday.
The FSRA (Financial Services Regulatory Authority) of ADGM clearly stated that their investigation uncovered “serious breaches and misconduct concerning the operations of three related party companies and Christopher Flinos.” Additionally, the statement confirmed that “no ADGM client assets or money were lost as a result of the relevant misconduct."
The FSRA also stated that ADGM revoked the Financial Services Permission (FSP) of Hayvn, thus terminating its license. Furthermore, they stated that Flinos will be banned indefinitely from performing any functions related to a financial services business in the ADGM. This imposed a collective fine of 8.85 million USD (32.5 million Dh) on the four involved parties.
AC Holding Limited was fined 3.6 million USD and Flinos was charged 750,000 USD. The fines on AC Limited (Hayvn ADGM) also equated to 3 million and 1.5 million were granted to AC Holding Limited.
Speaking on the logic of their policies, Emmanuel Givanakis, the chief executive officer of FSRA, stated that they will defend the policies with strident and relevant enforcement measures toward detrimental actors within the framework.
Givanakis included the information that the license of Hayvn ADGM has been canceled, significant penalties have been levied against the other parties, and that Christopher Flinos has been barred from exercising any powers relating to the financial services in ADGM.
Further to that, the Registration Authority (RA) of ADGM stated that it is investigating the Special Purpose Vehicle (SPV), AC Holding Limited (AC Holding), and it's only shareholder and director, Christopher Flinos, discovered that AC Holding was operating beyond the limits of its ADGM SPV commercial license by masquerading as an investment company. In addition to offering monetary financial services to clients, it was also engaging in the wiring of cryptocurrencies to fiat currencies and vice versa. It was also discovered that AC Holding provided four annual accounts which were not genuine to the RA during the period of 2019 to 2022.
The RA discovered that Christopher Flinos was involved in fraudulent trading activities in which AC Holding was actively participating in unlicensed transactions for the conversion of cryptocurrency into other currencies. It was revealed that numerous other parties were deceived regarding these transactions. Also, Christopher Flinos was involved in the deception and provided and fabricated hundreds of documents for companies which were used fraudulently to keep bank accounts open.
The RA has issued financial penalties amounting to $3.615 million, with $3.3 million attributed to Christopher Flinos,” for providing false information to the RA, fraud and document falsifications pertaining to the ADGM Companies Regulations 2020 Flinos admitted to engaging in a multitude of elaborate deceitful schemes along with the fabrication of company documents.
“Maintaining business integrity and safeguarding business confidence in ADGM are at the forefront of the Registration Authority’s objectives,” says Hamad Sayah Al Mazrouei, CEO of ADGM Registration Authority. “Where non-compliance is identified, the Registration Authority will take effective, proportionate and dissuasive disciplinary action to protect participants of ADGM.”
“We will not allow any firm or person who does not meet the high standards of being fit and proper and who pose an intolerable risk to investors, to hold any controlling positions within ADGM companies,” continues Hamad Sayah Al Mazrouei.
Why penalised
The FSRA of ADGM also said that Hayvn ADGM was penalised because it went beyond the limits of its FSP by permitting client transactions to be filtered through accounts controlled by AC Holding, which was an unregulated special purpose vehicle entity registered in ADGM, and doing so without any appropriate safeguards in place. In addition, it did not build and maintain sufficient systems and controls for managing its operations and risks, as well as for identifying and defining all of its client relationships, thereby violating the FSRA’s Anti-Money Laundering regulations.
The period of time from approximately October 2018 to approximately May 2024 saw Hayvn Cayman and AC Holding engage in unlicensed financial services activities concerning virtual assets in ADGM. This activity included a wide range of unauthorized financial undertakings, including dealing with payments and services connected to virtual assets.
Moreover, Hayvn Cayman facilitated client transactions pertaining to the processing of Virtual Assets to fiat currency conversions through the accounts held and controlled by AC Holding. AC Holding was an SPV which had no license from FSRA to undertake any financial services activity in ADGM, and thus it was legally constrained from doing so. Therefore, both Hayvn Cayman and AC Holding were unduly involved in the payments and arrangements unlicensed services pertaining to virtual asset operations in ADGM.
In addition, banned and penalized Christopher Flinos for undertaking unlicensed activities in ADGM while serving as SEO of Hayvn ADGM and CEO of Hayvn Cayman, and concurrently the sole director of AC Holding.
ADGM disclosed that he showed to be at the heart of the breaches and misconduct. “Christopher Flinos demonstrated a lack of integrity and failed to exercise appropriate stewardship, so as to enable Hayvn ADGM to operate in compliance with the rules and regulations of ADGM, for which he was the SEO.”
In addition, the regulator explained that Hayvn Cayman, AC Holding and Flinos worked together to create, and carry out false and misleading representation of the activities encompassed by the transactions with virtual assets pertaining to the does business through the accounts of AC Holding. This also encompassed the creation of more than 200 false and misleading documents on the letterheads of AC Holding to their banking partners for the purposes of opening and subsequently maintaining these accounts. These documents were produced under the guidance of Christopher Flinos with the aid of both Hayvn Cayman and AC Holding.
As noted by ADGM in the statement, Hayvn ADGM, Hayvn Cayman and Christopher Flinos gave untruths and gave misleading responses to the FSRA in relation to further requests regarding the AC Holding Control Account including describing the undertakings of business activities associated with each of the entities mentioned above and particularly AC Holding which was an affidavit committed to subverting the regulatory scrutiny.
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