A look into Nafeez's complex web of cos to drain out money from Padma Bank
In a brazen case of conflict of interest, Chowdhury Nafeez Sarafat, former chairman of Padma Bank, drained Tk245 crore from the scam-hit bank to an asset management company, Strategic Equity Management Limited (SEML), which is owned by his wife Anjuman Ara Shahid.
But he did not stop there; he invested funds from this asset management company into a new non-bank finance company in which both his wife and son Raheeb Safwan Sarafat Chowdhury are shareholders.
He established this new non-bank finance company called Strategic Finance Investments Limited (SFIL) in 2020, falsely presenting two foreign firms based in the US and Canada as shareholders.
The two companies – Canadian Maple Strategic Wealth Management LP and US-based Statisticker Inc – were listed as having invested Tk50 crore in SFIL and holding 50% of the shares. However, both companies were found to be fictitious.
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In its 2021 annual report, SFIL claimed that both foreign companies were registered with the securities and exchange commissions in the US and Canada.
However, a TBS investigation reveals that no such companies are listed on the Canadian and US exchanges. Also, the representatives of these foreign investors were found to be connected to Nafeez.
The entire scheme reveals how he orchestrated a cobweb of interconnected companies with overlapping shareholders. Some directors appointed to SFIL were representatives of various companies linked to the Canadian University, founded by Nafeez.
Nafeez worked as head of priority banking at Standard Chartered Bank in 2001 before becoming a shareholder director of Padma Bank (formerly known as Farmers Bank) in 2009 when it was granted a licence.
He did not have to look back since then as he emerged as a business tycoon during Sheikh Hasina's nearly 16-year tenure.
Here goes the story….
How Nafeez entered Padma Bank
Nafeez became a sponsor shareholder of Padma Bank at its inception in 2013, representing the First Bangladesh Fixed Income Fund managed by his asset management firm – RACE.
In his biography, which he submitted to become a director of Padma Bank, Nafeez disclosed owning 24.25% of RACE Asset Management Ltd, as per documents, obtained by TBS.
He joined the board in 2015 and was appointed chairman of the audit committee, according to a letter sent to the Bangladesh Bank and seen by TBS.
He then began draining funds from Padma Bank under the guise of investments in his asset management companies, including RACE. These investments failed to generate returns for Padma, leading to a severe liquidity crisis that ultimately caused the bank to collapse.
By 2017, Padma Bank was unable to repay its depositors due to poor investments and loan corruption, and it neither recovered its invested funds nor earned any returns.
Later, the Bangladesh Bank reconstructed the bank's board in January 2018 removing all 19 founder directors except Nafeez. Despite being on the board that faced allegations of loan corruption and fund mismanagement, Nafeez was appointed the bank's chairman by the Bangladesh Bank under the governorship of Fazle Kabir.
This is how Nafeez grabbed the bank without investing a penny from his pocket.
"The board of the bank took the decision to appoint him in line with the recommendation of the central bank," The Daily Star reported on 15 January 2018 quoting Sarafat.
"I will serve as chairman of the bank as an institutional representative of 12 organisations," he also said.
Soon after becoming chairman, he renamed the bank Padma from the original name Farmers.
Though Farmers Bank was given a licence for banking operations to provide financial services to farmers on a priority basis, it deviated from its objective by changing the name.
Soon, the state-owned Sonali Bank, Janata Bank, Agrani Bank, Rupali Bank and Investment Corporation of Bangladesh were forced to invest Tk715 crore as bailout for the erstwhile Farmers Bank.
The state-owned banks also invested an additional amount of around Tk1,000 crore in the bank in other forms, such as subordinate bonds and fixed deposits "under pressure".
After bringing investment from state-owned banks, Nafeez as the chairman of Padma Bank held a meeting at the Westin Hotel with all investors when the media was invited.
In that meeting, Benazir Ahmed, former inspector general of police, was also present and he introduced himself as a cousin of Nafeez when delivering a speech at the event.
However, the total investment of public money could not stop the capital erosion of the bank, as corruption continued.
Under his chairmanship, Padma Bank issued a press release in September 2021 announcing that it had entered into an agreement with US-based investment bank DelMorgan and Company to secure a $700 million investment, comprising $350 million in equity and $350 million in credit facilities.
Under the pretence of securing foreign funds, the bank, with the central bank's consent, reconstructed its balance sheet while concealing accumulated losses exceeding Tk900 crore. It also removed previous annual reports from its website to obscure its financial health and other details.
Also, the Bangladesh Bank eased regulations for Padma Bank, particularly concerning the maintenance of the Cash Reserve Ratio and Statutory Liquidity Ratio.
However, the promised funds never materialised as the announcement of securing foreign investment turned out to be entirely false.
He served as chairman of the bank for six years, during which he neither attracted any new investments nor improved the bank's financial health. Meanwhile, he established another finance company and resigned from Padma Bank in January 2024.
Shortly after his resignation, the bank's merger with another institution was announced.
How Nafeez used Padma to invest in his wife's company
In 2015 and 2016, Padma Bank invested Tk145 crore into three newly established mutual funds: Tk100 crore in the First Alternative Investment Fund, Tk25 crore in the Strategic Equity Management Shariah Fund, and Tk20 crore in the Strategic Equity Management Fund.
At the time of these investments in the newly introduced special-purpose vehicles and alternative funds, Nafeez was the chairman of the bank's audit committee.
All these funds were managed by Strategic Equity Management Limited (SEML), an asset management company owned by Anjuman Ara Shahid, as noted by the Registrar of Joint Stock Companies (RJSC).
Additionally, Anjuman is a sponsor shareholder of Padma Bank, holding 20 lakh shares, according to bank documents.
SEML now holds 6% shares in the new finance company SFIL. Ehsanul Kabir, managing director and CEO of SEML, was nominated for the company in SFIL.
Anjuman used multiple layers to keep her relationship with SEML hidden.
For instance, Mashiur Rahman, a retired bureaucrat who served as director general of the Telecom Division at the Ministry of Posts and Telecom, is now the chairman of Strategic Equity Management. He was appointed as the director by SoftHorizon, which is owned by Anjuman Ara, according to the RJSC.
When contacted, Mashiur Rahman said he has no relation with SEML. He is only an employee of Nafeez's company CdNet Communications. He is the CEO of CdNet Communications where Nafeez holds major shares. Nafeez is also with SFIL which is also a shareholder of CdNet, he added.
"I was kept as nominated director in SoftHorizon and nominated chairman for SEML but I know nothing about those companies," Mashiur told TBS.
"I was not even asked about the nomination for the chairmanship of SEML. I suddenly came to know that I was nominated as the chairman of this company. They [Nafeez and his wife] sometimes bring letters about such nominated directorship to me and I agree if there is no objection," he said.
Before joining CdNet, he served Bangladesh Submarine Cables PLC for more than four years till 25 June 2022. Soon after his retirement, he joined CdNet on 25 August 2022.
"Nafeez picked me as I have long experience working with the Submarine Cables PLC," he said.
The government issued three submarine cable licences in the private sector in September 2022 to Summit Communications, CdNet Communications, and Metacore Subcom Ltd.
Earlier in 2021, MK Alamgir, the founding chairman of Padma Bank, filed a complaint with the Bangladesh Securities and Exchange Commission (BSEC), claiming that his successor Nafeez Sarafat invested Tk100 crore from the bank in First Alternative Investment Fund through his other company SEML, which constituted a conflict of interest.
Alamgir who resigned from the bank on allegations of loan corruption sought an investigation into this matter.
BSEC Chairman Shibli Rubayat-Ul-Islam, at an event organised by the Economic Reporters Forum on 13 March 2021, acknowledged the complaint, saying they will look into the misuse of the fund. However, there has been no reported progress on the investigation.
Additionally, in 2015, Padma Bank invested Tk100 crore in a newly introduced investment vehicle called the Bangladesh Fixed Income Special Purpose Vehicle.
The fund manager of this investment is Bangladesh Race Management, a private company owned by Nafeez.
Sentinel Trustee and Custodial Services Limited, established by Nafeez and his associates, served as the trustee for Tk100 crore of the Bangladesh Fixed Income Special Purpose Vehicle fund. Sentinel shares the same office address as Race Asset Management on its website, highlighting their connection.
According to BSEC regulations, the fund manager and trustee must be separate entities to protect investors' interests.
When asked about Padma Bank's investments in his companies during his tenure, Nafeez responded, "I was neither the chairman nor the Audit Committee Chairman of Padma Bank's Board of Directors when these investments were approved by Muhiuddin Khan Alamgir (former Chairman) and Babul Chisty (former EC Chairman). Additionally, the Audit Committee does not approve investments."
He also asserted that "Strategic Equity Management is not owned by my wife."
He claimed that Padma Bank earned Tk39.50 crore till the 2023-24 financial year from those investments made during the year 2015-16. However, The Business Standard could not verify the information as he did not provide any supporting documents.
"Though I am not the current chairman of the Bank, upon your request, I obtained this information from the bank," said Nafeez in a written comment.
How he sets up a new finance company
When more than half of 29 non-bank financial institutions were struggling to survive, the Bangladesh Bank issued the licence of another new company, SFIL, in March 2020 based on the declaration that a significant portion of the investment would come from foreign investors.
The licence was given when Nafeez was the chairman of Padma Bank which was on the verge of collapse due to loan corruption.
According to the annual report of SFIL for 2022, shareholding comprises 96% institutional investments and 4% held by two individuals.
Among individual directors, Anjuman Ara Shahid, and Raheeb Safwan Sarafat Chowdhury combinedly hold 4% shares worth Tk4 crore.
Anjuman Ara Shahid is the founding chairperson of SFIL and she was introduced as a Canada-based women entrepreneur and vice-chairman of the Canadian University of Bangladesh in the annual report.
However, Nafeez in his biodata submitted to the then Farmers Bank in the year 2009 as a sponsor shareholder, mentioned that his wife is a housewife.
He also mentioned that he was a relationship manager at Standard Chartered Bank till September 2001. He became chairman of Race Management in 2008.
Despite having disclosure of his wife and son's directorship in the annual report of SFIL, Nafeez lied to The Business Standard saying that "Neither me nor any of my family members hold any directorship in this NBFI. A list of SFIL's board of directors is accessible at: https://www.sfilbd.com/about-us/leaders/board-of-directors. You can see from this list that none of the directors of SFIL are employed at the Canadian University of Bangladesh and none of my family members is a director at SFIL."
After TBS approached him for comment, he removed the annual reports for 2020 to 2022 from the SFIL company website. Previously accessible via hyperlinks, these reports are no longer available following the inquiry.
Meanwhile, the Bangladesh Financial Intelligence Unit (BFIU) on 26 August asked banks to freeze the accounts of Chowdhury Nafeez Sarafat, his wife Anjuman Ara Shahid and son Rahib SafwanSarafat Chowdhury.
The BFIU has also asked banks to suspend all transactions conducted under their privately owned institutions.
The organisation has directed the suspension for 30 days under Section 23 of the Money Laundering Prevention Act, 2012.
Chowdhury Nafeez Sarafat is also the chairman of Bangladesh RACE Management PCL, the country's biggest fund management company.
How he secured SFIL's licence with fake claims
Though the SFIL in its annual report claimed that 50% of investment worth Tk50 crore came from US and Canada-based investors named Statisticker Inc and Canadian Maple Strategic Wealth Management LP, both companies were found to be fake.
On the other hand, representatives from the Canada-based company in SFIL are found connected with the Canadian University Of Bangladesh founded by Nafeez.
Another investor, Statistiker, which SFIL claimed was a US-based company, is represented by a Bangladeshi retired bureaucrat.
Canadian Maple Strategic Wealth Management
The company holds 48% shares worth Tk48 crore and US-based Statisticker Inc holds a 2% share worth Tk2 crore of SFIL.
The annual report for 2022 introduced Canadian Maple Strategic Wealth Management as a Toronto-based licenced fund listed with the Ontario Securities Commission.
However, The Business Standard found no listed firm in this name with the Ontario Securities Commission. There is another firm named Canadian Maple Equity Management Inc. available and the logo of this company looks similar to the logo used for Canadian Maple Strategic Wealth Management in the SFIL annual report.
When inquired through email from The Business Standard, Canadian Maple Equity Management confirmed that it is not related to Canadian Maple Strategic Wealth Management.
TBS investigation also found that the company is not registered anywhere. The Maple website phone number is found at the name of A Shahid (4167559132), which is Anjuman Ara Shahid of SFIL.
According to the annual report, Professor William H. Derrenger is the nominated director of Canadian Maple Strategic Wealth Management. He is the founding vice chancellor of the Canadian University of Bangladesh, which was founded by Chowdhury Nafeez Sarafat.
When asked about the relationship with Canadian Maple, Derrenger said, "I have been an independent director representing our Canadian shareholders from the inception. I have been inactive from the beginning; I have never had much contact with the other board members except during the occasion."
He has been inactive from the beginning as no investment came from the investors who were intended to invest, according to him.
Another nominated director from Canadian Maple Strategic Wealth Management LP is Md Shahrukh Adnan Khan, who was also introduced as the associate professor and acting dean of the School of Science and Engineering as well as head of the EEE department and director of Innovation and Commercialisation Centre at the Canadian University of Bangladesh.
Statisticker Inc
Another foreign investor was introduced in the annual report as a US-based licenced fund manager listed with the US SEC.
However, The Business Standard investigation found no registered firm in this name with the US SEC.
The Business Standard enquired about the company with the help of the US Embassy in Dhaka and found that the company is registered by a Bangladeshi individual. The company is not operational.
Zahid Hossain, a retired bureaucrat, represents Statisticker Inc. as the nominated director, according to the annual report of SFIL. He was introduced as the former executive chairman of the Board of Investment in the SFIL annual report for 2022.
However, TBS did not find any executive chairman at this name in the Board of Investment (BOI) which was later renamed as Bangladesh Investment Development Authority (Bida).
When contacted about foreign investors, Nafeez who claimed he has no relation with SFIL said "I had enquired the managing director of SFIL Finance PLC and was informed that both these foreign companies are legit and governed under foreign jurisdictions."
He also defended the foreign investment saying, "The Bangladesh Bank, upon verifying their existence, and after scrutinising their capital contributions had issued NBFI licence."
Moreover, he mentioned that investment from both these companies came through proper banking channels.
SFIL institutional investors linked to Canadian University
Among other institutional sponsors, Strategic Finance holds a 20% share worth Tk20 crore and Padma Bank Securities, in which Padma Bank invested Tk100 crore, holds 20% worth Tk20 crore.
Shahnul Hasan Khan represents the nominated director for Strategic Finance who was introduced as the executive chairman of the Canadian University of Bangladesh in the annual report of SFIL for 2020.
In the latest annual report for 2022, Shoriful Islam was shown as nominated director for Strategic Finance who was introduced as a former employee of RACE Management.
Mohammad Shariat Ullah is the nominated director of Padma Bank securities on the SFIL board.
He was introduced as the managing director of Task Limited and head of IT of Padma Bank Securities Limited and Canadian University of Bangladesh, Dhaka.
Padma Bank securities, in which Padma Bank invested Tk100 crore, is now holding 20% shares of SFIL worth Tk 20 crore.
The office of SFIL is also located on the Canadian University of Bangladesh premises.
