Bonikbarta Exclusive

Chowdhury Nafeez Sarafat, a former bank official, obtained a license for an asset management company named RACE Management PCL in 2008. He was accompanied by Dr. Hasan Taher Imam as his associate. The asset management firm gained significant attention at the time by conducting various workshops related to the capital market. They vowed to transform the mutual fund sector in the country. However, they were later blamed for the severe disinterest among investors in mutual funds. Throughout this period, Sarafat received support from the Bangladesh Securities and Exchange Commission (BSEC) and enjoyed numerous advantages from both the Bangladesh Bank and the Ministry of Finance. Nafeez Sarafat, once a bank officer, gradually emerged as one of the most influential mafia figures in the financial sector of the country. His ties to the upper echelons of the Awami League government were solidified by his roots in Gopalganj. He reportedly referred to former Prime Minister Sheikh Hasina as ‘Aunt’. Leveraging these connections, he rose to prominence during the tenure of the ousted government, becoming a formidable economic hitman. His wrath led to the imprisonment of writer Mushtaq Ahmed and cartoonist Ahmed Kabir Kishore, both of whom endured severe torture. Mushtaq Ahmed eventually died in custody. Following the fall of Sheikh Hasina’s government, the Anti-Corruption Commission (ACC) recently launched an investigation into Sarafat’s acquisition of banks and embezzlement of funds from the capital market.

After RACE’s inception in 2008, the firm secured the management of 10 closed-end mutual funds by 2013. Currently, the company manages 13 funds. Sarafat and Imam primarily used these mutual funds to generate personal wealth. They invested fund money to purchase shares of the Farmers Bank (now Padma Bank), securing directorships on the bank’s board. In addition to these two, Sarafat’s wife, Anjuman Ara Shahid, was also among the bank's founders. Despite these investments, the funds reaped no benefits. When Farmers Bank’s then-chairman and former Home Minister Mohiuddin Khan Alamgir stepped down amid a scandal, Sarafat took over as the bank's chairman. He rebranded the bank as Padma Bank. To rescue the bank from its irregularities and corruption, the state-owned Investment Corporation of Bangladesh and four state-owned banks—Sonali, Janata, Agrani, and Rupali—had to provide a capital injection of BDT 7.15 billion.

Upon becoming the chairman of Padma Bank, Sarafat expanded his influence in the financial sector. By joining the association of bank owners, he elevated his status to that of an elite businessman. Using his personal relationship with former Prime Minister Sheikh Hasina, Sarafat grew increasingly powerful and reckless. He also claimed former IGP Benazir Ahmed as his cousin and maintained close ties with top officials of intelligence agencies. By leveraging these connections, Sarafat succeeded in whatever endeavor he pursued.

Sarafat had strong ties with influential figures in the banking and financial sector, including Salman F. Rahman and Nazrul Islam Mazumder. He involved Mazumder with his media outlets. There are rumors that when Salman F. Rahman was encouraging people to invest in shares of Beximco Limited to boost the company’s stock price, Sarafat also invested fund money in the company’s shares. However, when Sarafat later sold Beximco shares without informing Salman F. Rahman, the stock price plummeted, angering Rahman.

Amid the fallout with Salman F. Rahman, Nafeez Sarafat established a close relationship with former Finance Minister AHM Mustafa Kamal. He also developed ties with the then-Finance Secretary Abdur Rouf Talukder. Sarafat leveraged his relationship with Mustafa Kamal to push for the direct listing of Best Holdings’ IPO, though this attempt ultimately failed. A few years later, Sarafat managed to list Best Holdings through the intervention of former BSEC Chairman Professor Shibli Rubayat Ul Islam. Nafeez Sarafat arranged for the placement shares of Best Holdings to be allocated in the names of former IGP Benazir Ahmed’s two daughters. By gifting placement shares to various influential individuals and intelligence officials, Sarafat maintained his power. He used this influence to secure various benefits, ensuring that none of his work was stalled in any government office. Many individuals, in turn, maintained good relations with Sarafat to protect their own interests. Sarafat allegedly took large sums from them for lobbying.

Sarafat always aimed for large projects in his planning. However, his lobbying efforts to secure the approval of the IPO for a small company like ‘Coppertech Industries’ surprised many. Sarafat had gifted placement shares of Coppertech Industries to numerous influential figures. As a result, he was determined to list the company on the stock market by any means necessary. However, when reports of irregularities in Coppertech’s financial statements surfaced in the media, the listing process was halted. The Financial Reporting Council (FRC) recommended punitive action against the auditor following an investigation, leading the Institute of Chartered Accountants of Bangladesh (ICAB) to ban the auditor, Ahmad & Akhter. At that time, Sarafat lobbied with the FRC to address the Coppertech issue.

CQK Mustaq Ahmed, the former chairman of the Financial Reporting Council (FRC), told Bonik Barta, “Chowdhury Nafeez Sarafat approached me regarding Coppertech’s IPO at that time. I questioned why he was involved, as he wasn’t connected to the company. However, he couldn’t influence me on this matter. I had recommended punitive action against the company’s auditor. I didn’t have the authority to halt the IPO. The IPO was eventually was approved. Additionally, Asadul Islam, who was then the Secretary of the Financial Institutions Division, also called me about Coppertech’s IPO.”

Nafeez Sarafat eventually persuaded a former president of the Dhaka Stock Exchange (DSE) to send a letter from the stock exchange to the Bangladesh Securities and Exchange Commission (BSEC) seeking legal exemption for Coppertech’s listing. Following this, BSEC granted the exemption, and Coppertech was eventually listed. MTB Capital’s CEO, Khairul Bashar Abu Taher Mohammed, who was responsible for issue management during the company’s IPO process. He later received assistance from Nafeez Sarafat in securing his appointment as the DSE’s Chief Regulatory Officer (CRO). He continues to hold the CRO position at DSE.

Despite adverse remarks from the stock exchange, several IPOs were approved during the tenure of BSEC’s former chairman, Professor Dr. M. Khairul Hossain. However, after criticism arose regarding Coppertech’s IPO, the commission adopted a policy of not approving IPOs without the stock exchange’s opinion. The responsibility for approving Coppertech’s IPO was strategically shifted to DSE, even though the commission had the legal authority to cancel the IPO. Additionally, despite various allegations against RACE, Khairul’s commission did not initiate any investigation or punitive action. Even a decision to inspect RACE’s activities was not implemented. Furthermore, citing the Ministry of Finance’s recommendation, Khairul’s commission issued a notification extending the tenure of closed-end mutual funds by another 10 years. Certain individuals, posing as investors, had lobbied the Ministry of Finance for this extension. Subsequently, the Ministry of Finance recommended to BSEC that the tenure be extended, and BSEC issued the notification with its consent. However, BSEC had full legal authority not to make this decision in the interest of the capital market and investors.

When asked about this, BSEC’s former chairman, Professor Dr. M. Khairul Hossain, told Bonik Barta, “I did not make any decisions unilaterally. The commission made the decision collectively. Moreover, Commissioner Nizami was in charge of the Mutual Funds Division, and I did not interfere in his work. I had instructed an inspection of RACE’s activities. Commissioner Nizami knows best why it was not implemented later. I had no role in extending the tenure of mutual funds; it was extended due to the Ministry of Finance’s directive. I even sent a letter to the Ministry of Finance stating that extending the tenure might not be appropriate.”

During Khairul’s tenure as chairman, Professor Md. Helal Uddin Nizami, the commissioner in charge of the Mutual Funds Division, had shown various forms of favor to RACE. Regarding decisions related to mutual funds, Dr. M. Khairul advised speaking with former commissioner Nizami. However, efforts to contact Professor Md. Helal Uddin Nizami for comment were unsuccessful.

Recently, Formanul Islam, the former managing director of Bangladesh Infrastructure Finance Fund Limited (BIFFL), posted on social media that Chowdhury Nafeez Sarafat had pressured him to invest BDT 5 billion in bonds issued by Best Holdings. He mentioned that at that time, Salman F. Rahman and Chowdhury Nafeez Sarafat were present in the office of then-Finance Secretary Abdur Rouf Chowdhury. Shortly after that meeting, Formanul Islam was forced to resign from BIFFL.

After setting his sights on Padma Bank, Nafeez Sarafat turned his attention to Southeast Bank. He strategically ousted the bank’s former chairmen, MA Kashem and Azim Uddin Ahmed, from the board. In this effort, Southeast Bank’s chairman Alamgir Kabir sought Sarafat’s assistance to consolidate his control over the bank. Legal actions were initiated against Azim and Kashem through the Anti-Corruption Commission (ACC), citing allegations of irregularities at North South University. Following these allegations, both were removed from their positions on the bank’s board. Subsequently, Nafeez Sarafat made his wife, Anjuman Ara Shahid, as the bank’s director. He also attempted to appoint his son, Chowdhury Rahib Sarafat, as a director. But this effort was did not come to fruition due to his son’s lack of experience.

Nafeez Sarafat also gained control over several publicly listed companies, including Unique Hotel & Resorts and National Tea Company. He joined the board of Unique Hotel as a nominee director of the company founded by Noor Ali. Additionally, he acquired ownership stakes in Unique Meghnaghat Power. He took on the role of managing director primarily through his company, Strategic Finance Limited (SFL). Although the main investor of this 584 MW power plant is Unique Group, Nafeez Sarafat was in charge of getting various types of negotiations and approvals. As a result, he was able to make hefty profits from this project even with a small investment. The ownership of the power plant is divided among SFL, which holds 38.76 percent, Unique Hotel & Resorts, which holds 37.24 percent, and Qatar-based Nebras Power, which holds 24 percent. Notably, 24 percent of the shares in the power plant were sold to Nebras Power for $24 million. In this case, 51 percent shares were sold by Nafeez Sarafat’s company SFL and 49 percent shares were sold by Unique Hotel. By selling these shares, Sarafat's company made a profit of more than a hundred million.

As a nominee director of Finex Software Limited, Nafeez Sarafat also secured a position on the board of publicly listed ‘National Tea Company’. The company received approval from the Bangladesh Securities and Exchange Commission (BSEC) to raise BDT 2.79 billion by issuing new shares. Recently, the subscription period for the capital increase was extended until September 19.

Nafeez Sarafat’s efforts to list Best Holdings through a direct listing were thwarted by the Shibli Commission. Although this commission eventually approved the company’s listing through an IPO. However, the commission, during its tenure was criticized for not taking visible action against various irregularities at RACE. Despite attempts to contact former BSEC Chairman Professor Shibli Rubayat Ul Islam and RACE Chairman Chowdhury Nafeez Sarafat for comments, they did not respond.

Since RACE’s inception, Chowdhury Nafeez Sarafat and Dr. Hasan Taher Imam jointly managed the fund. However, over the past three to four years, conflicts arose between them, even leading to a court battle over the ownership and control of RACE. Sarafat holds a 25 percent stake in RACE, while Imam holds 75 percent. Both Sarafat and Imam have faced allegations of misusing RACE’s funds for personal gain. As managing director of RACE, Imam was also involved in questionable investment decisions. There are allegations that Imam installed three directors on the board of Bangladesh General Insurance Company (BGIC), which served as a trustee for several of RACE’s funds. He did so by purchasing shares under various private entities’ names. Additionally, there are claims that Imam facilitated transactions through Multi Securities at higher commission rates for RACE’s funds, while other clients were charged half the commission rate. Market observers believe that Imam was responsible for controversial investment decisions, such as corporate bonds for Regent Spinning Mills and Padma Bank.

When asked about these allegations, Hasan Taher Imam, managing director of RACE Management PCL, told Bonik Barta, “At the time of investing in Regent Spinning’s bonds, the company was in good condition. The investment in Padma Bank was made with future prospects in mind. Although higher commissions were paid for transactions of RACE’s funds through Multi Securities, we received returns on investments from the securities. When this is adjusted, it would reduce commission expenses. The conflict with Nafeez Sarafat arose from disagreements over several investments. I have faced harassment and persecution over the past few years. BSEC Chairman Shibli Rubayat also harassed me in various ways. I have filed a lawsuit against Sarafat and BSEC’s decisions. The investments made through BGIC as trustee for RACE’s funds were not made directly in the company but through private entities. Even though we were on the trustee board, we did not play a role in influencing decisions.”

RACE Management has come under scrutiny for allegedly engaging in substantial block market transactions through their managed funds, in violation of mutual fund regulations. Consequently, the Bangladesh Securities and Exchange Commission (BSEC) has suspended block market transactions for all funds managed by RACE until further notice. Additionally, trading privileges for Multi Securities and Services Limited in the block market have also been suspended. This decision was formalized in an order issued by BSEC on July 4.

However, Hasan Taher Imam of RACE disputed the allegations, claiming that the transactions did not violate any laws. He accused BSEC of issuing the directive unlawfully.

During Shibli's tenure as Commissioner, the Mutual Fund Division was overseen by former Commissioner Professor Dr. Mizanur Rahman. When contacted, he told Bonik Barta, “An investigation spanning over a year into RACE's assets and investments did not reveal any significant irregularities. However, upon learning of RACE’s affiliated individuals on the board of BGIC, BSEC decided to remove BGIC from its trustee duties for the funds. This was a matter of conflict of interest.”

Regarding the allegations of front running through RACE’s funds, Dr. Rahman said, “This issue was not part of the terms of reference during our investigation. Moreover, it is a time-consuming task. Since there are accusations, the Commission may choose to conduct a thorough investigation if it deems necessary.”

Nafeez Sarafat, as owner of the Canadian University of Bangladesh, is embroiled in another controversy over the alleged irregular allocation of a plot in Rajuk's Purbachal New Town project. It is claimed that Sarafat used his influence to secure the plot. He also involved former IGP Benazir Ahmed in the matter. Moreover, in return for providing capital support to Padma Bank, Sarafat allegedly rewarded former ICB Managing Director Kazi Sanaul Hoq with the position of Managing Director of the Dhaka Stock Exchange (DSE) after his retirement. However, Hoq’s tenure at the Exchange was short-lived. He later became Chairman of Rupali Bank, a position from which he was recently removed.

The cartoon on the left, drawn by Ahmed Kabir Kishore in 2022, depicts Nafeez Sarafat, while the one on the right was drawn in 2020.

Sarafat’s influence grew significantly after the 2018 national elections. He played a key role in bringing several foreign observers to Bangladesh, who controversially declared the election to be fair. This further proved Sarafat’s standing with the government. In May 2020, cartoonist Ahmed Kabir Kishore and writer Mushtaq Ahmed were arrested under the Digital Security Act for drawing cartoons about Sarafat's control over banks. Kishore was taken from his home on May 2, and Mushtaq on May 4. Both were subjected to severe physical and psychological torture after their arrests. After that, they were shown arrested in a case by RAB on May 5. Over a 10-month period, their bail petitions were rejected at least six times. Mushtaq Ahmed died in custody on February 25, 2021, at the Kashimpur High-Security Prison. Kishore was released on bail in March of the same year. He later revealed in a media interview that he was questioned about drawing cartoons of a bank chairman while being tortured. According to sources, Nafeez Sarafat was present during the torture of Kishore and Mushtaq. It was Sarafat who allegedly ordered their inhumane treatment, using former IGP Benazir Ahmed to exact punishment over the drawing of cartoons. Mushtaq’s death on February 25, 2021, prompted expressions of grief and deep concern from the United States, France, Germany, Italy, the Netherlands, Denmark, Norway, Spain, Sweden, Switzerland, the European Union, as well as the High Commissioners of the United Kingdom and Canada. These 13 diplomats called for a prompt, transparent, and independent investigation into the circumstances surrounding Mushtaq's death. UN High Commissioner for Human Rights Michelle Bachelet also urged the Bangladesh government to ensure a swift, transparent, and independent investigation into both Mushtaq Ahmed’s death and the allegations of torture against cartoonist Kishore. Human Rights Watch issued a statement demanding an impartial investigation into Mushtaq Ahmed’s death. Nationally, the incidents involving the abuse of Kishore and Mushtaq drew sharp reactions from the National Human Rights Commission and Transparency International Bangladesh (TIB).

According to RACE's latest portfolio report, as of June 30, the total assets under management across 12 funds amounted to BDT 32.37 billion at purchase cost. However, the market value of these assets stood at BDT 23.5 billion, reflecting a decline of BDT 8.87 billion. During this period, BDT 5.99 billion was invested in unlisted securities at market value. The purchase cost of these investments was BDT 6.33 billion. A significant portion of these investments was made in bonds issued by Padma Bank, Multi Securities, and Regent Spinning. Over the past five years, the compound annual growth rate (CAGR) of net asset value (NAV) returns for RACE's closed-end mutual funds has been a negative 1.1 percent.