Independent Review Finds No Evidence Supporting Hindenburg’s Allegations Against Freedom Holding

Freedom Holding Corp., which became the target of a short-seller attack in August 2023, underwent an independent review conducted by Forensic Risk Alliance and Morgan Lewis & Bockius LLP. The findings concluded that the allegations made by Hindenburg Research were unsubstantiated.

In August 2023, the U.S.-based short-selling firm Hindenburg Research accused Freedom Holding Corp. of market manipulation, sanctions evasion, and pursuing aggressive growth allegedly supported by misstatements in its financial reporting.

The allegations were not substantiated. Independent firms Forensic Risk Alliance and Morgan Lewis & Bockius LLP concluded that Freedom Holding’s growth in recent years had been driven primarily by organic factors, including the expansion of its client base and trading volumes, strategic acquisitions, and revenues generated from securities trading activities disclosed in the company’s filings with the U.S. Securities and Exchange Commission (SEC) and confirmed by its audited financial statements.

The review also confirmed that the holding company maintains an effective sanctions compliance framework and anti-money laundering (AML) controls operating at both global and local levels.

Investigators found no evidence of sanctions circumvention, dealings with sanctioned individuals, or manipulation of the holding company’s shares or bonds issued by the Kazakhstan Sustainability Fund.

In addition, the review confirmed that appropriate compliance and control procedures were followed in transactions between Freedom Finance Europe Ltd., the group’s Cyprus-based subsidiary, and FST Belize, including AML and sanctions compliance requirements.

The results of Deloitte’s audit were also disclosed in Freedom Holding Corp.’s fiscal year 2024 financial statements. According to the audit, the company operates in compliance with applicable sanctions regulations, maintains appropriate compliance procedures, regularly publishes financial reports, and responds to inquiries from regulators. Freedom Holding Corp. is regulated by the U.S. Securities and Exchange Commission (SEC), where its financial statements and related disclosures are publicly available.

Hindenburg Research published its report targeting Freedom Holding Corp. on August 15, 2023. The report contained a number of serious allegations that were not supported by evidence.

The short sellers sought to drive down the price of FRHC shares on the NASDAQ exchange. However, the impact on Freedom Holding Corp.’s stock proved limited. Within three days of the report’s publication, the company’s share price had risen approximately 15% above its level on the day of the attack.

The increase was fueled in part by a so-called short squeeze. Investors who had opened short positions in anticipation of further declines were forced to buy back shares in order to close those positions. This additional demand amplified the upward movement in the stock and contributed to further gains. According to experts cited by Kursiv, the value of short positions opened following the report may have reached approximately $100 million.

Hindenburg has previously targeted a number of major companies, including Adani Group, Singularity Future Technology, and HF Foods, whose shares proved more sensitive to the firm’s reports. By the time Hindenburg published its report on Freedom Holding, however, investors were already familiar with the short-seller’s strategy, and the report attracted significantly less market reaction.

Immediately following the publication of the report, Freedom Holding Corp. founder and CEO Timur Turlov gave an extensive interview in which he rejected the allegations and addressed each of the report’s claims in detail.