After Four-Month Probe: Freedom Holding Corp. Clears Major Allegations in Hindenburg Report

Freedom Holding Corp. (Nasdaq: FRHC) has concluded an independent external review commissioned to address the sweeping allegations leveled by short-seller Hindenburg Research in August 2023. The investigation, which took approximately four months and involved law firm Morgan, Lewis & Bockius LLP and forensic accounting firm Forensic Risk Alliance, has largely exonerated the company on most claims while uncovering one area requiring enhanced governance.

What the Investigation Covered

The probe examined FRHC’s main operating subsidiaries in Kazakhstan and Cyprus, with teams conducting on-site visits, document analysis, data analytics, and extensive interviews with senior management and external partners. Investigators were unable to assess certain allegations due to insufficient detail or outdated information provided in the Hindenburg report. However, on matters where evidence could be examined, the findings painted a notably different picture than the short-seller’s allegations.

Key Findings on Compliance and Sanctions

One of Hindenburg’s central claims involved potential sanctions violations. The external review found that Freedom Holding Corp. maintains comprehensive global and local sanctions and anti-money laundering (AML) procedures implemented across its compliance and business units. Crucially, investigators identified no evidence of sanctions evasion or dealings with sanctioned oligarchs, despite the company’s historical presence in regions subject to international sanctions.

The investigation did acknowledge that certain FRHC non-US subsidiaries had conducted business with sanctioned financial institutions and individuals—a fact the company had already publicly disclosed. However, the review concluded these transactions did not constitute material violations of US, EU, UK, or other sanctions regimes.

Growth Attribution and Organic Expansion

Addressing claims that FRHC’s recent growth stemmed from improper practices, the external review concluded that the company’s expansion was driven primarily by organic growth including customer acquisition and increased trading volume, supplemented by legitimate acquisitions and investment gains. The investigation found no evidence of market manipulation or illegal business practices fueling the company’s rise.

This distinction matters significantly for investors assessing whether FRHC’s revenue trajectory reflects genuine business momentum or artificially inflated numbers.

Crypto Funding and Asset Management Claims

Hindenburg alleged that client accounts were funded through questionable sources including cryptocurrencies and physical cash. The review found no evidence supporting these claims, except for standard cash deposits made at retail banking counters subject to normal AML compliance checks.

On holdings of Kazakhstan Sustainability Fund bonds, investigators confirmed the company does hold these securities despite their negative carry—but determined this represents a deliberate trading strategy expected to generate returns based on anticipated interest rate movements, not speculative manipulation.

Trading Relationship Scrutiny

A notable focus of the investigation involved FRHC’s Cyprus subsidiary Freedom Finance Europe Limited and its business dealings with FST Belize. The external review found documented policies, procedures and controls governing these relationships, particularly regarding AML and sanctions compliance. Critically, no evidence emerged to support allegations that transactions between these entities were designed to generate inflated or “fake” revenue figures.

Russian Operations Transition

The investigation addressed questions surrounding FRHC’s former Russian subsidiaries. Reviewers confirmed that the sale of Russian operations constituted a valid transaction with no evidence that CEO Timur Turlov or the company maintained continued control following the divestment—directly contradicting claims embedded in the Hindenburg report.

IPO Allocation Practices

Another allegation claimed that FRHC brokerage clients faced pressure to purchase company stock in exchange for IPO allocations or access to secondary market shares near IPO pricing. The investigation found no evidence supporting this practice. The company’s IPO allocation procedures did not include such quid pro quo requirements.

Next Steps and Governance Enhancement

While accepting the external review’s overall findings, FRHC management solicited recommendations for strengthening its compliance infrastructure. The review team proposed enhancements, which the board has now accepted. Senior management, including the Vice President of Compliance, has begun implementing these recommendations as part of the company’s ongoing commitment to governance standards.

The full external review findings align with FRHC’s audited financial statements and SEC filings, all available through the SEC’s official website. The company emphasized that this investigation reflects its commitment to transparency and robust compliance operations despite the severity of the initial allegations.

For investors tracking FRHC, this four-month independent assessment provides substantial documentation addressing the most serious claims raised by the short-seller campaign, though ongoing market scrutiny will likely persist in evaluating the company’s execution on newly recommended compliance measures.