Freedom Holding: After ‘Borat,’ the Silliest Kazakh Import of the Century

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If one word could describe the U.S. stock market of 2020, it would be “improbable.” The S&P 500, for example, has risen about 14.14 percent this year despite a pandemic that is deadly to both people and corporate profits. Yet even after witnessing this year’s string of unprecedented developments, investors might be shocked to learn what lies behind the recent muscular share price growth of Freedom Holding Corp. This Las Vegas–incorporated bank and securities brokerage has its principal office in Almaty, Kazakhstan, and a major presence in other cities of the former Soviet Union. 

In Freedom Holding’s most recent quarterly filing of Nov. 19, management attributed the company’s earnings success to customers undertaking a higher volume of trades as a result of “the unique market characteristics surrounding the COVID 19 pandemic.” In other words, quarantined or marooned investors are day trading to pass the time as disease spreads across the world. And thus Freedom Holding’s astronomical revenue growth has seemingly made it the fastest-growing financial services company on Earth.

So why aren’t the big brokerage operations of the U.S. and Western Europe replicating this model? A clue as to why they are not can be found in Freedom Holding’s Securities and Exchange Commission filings. The Foundation for Financial Journalism has found that Freedom Holding serves up gaudy growth figures with few disclosures or incongruous explanations at best — and accompanies them with an operations structure akin to that of a penny stock company.

Despite the fact that Freedom Holding is incorporated in the States and its shares are traded on Nasdaq, nothing about its actual U.S. presence should give American investors any confidence. Annual income for 6 Freedom Holding subsidiaries Sources: audited income statements[/caption]

Straining for cash in other parts of the organization

Yet while a pile of cash sits at its Cyprus subsidiary, Freedom Holding is showing signs of being desperate for cash in virtually all other corners of its organization. Freedom Finance Europe is offering money market interest rates that are four to six times higher than what U.S. institutions are promising. Banks usually attract depositors for their money market funds by paying a few extra basis points in interest — but not multiples of what a rival does. U.S. regulators often scrutinize banks whose money market interest rates are outliers within the marketplace on the view that management may want to quickly inject cash to conceal previous losses. In fact, the parent company’s main division, Freedom Finance, is paying its brokers a 15 percent commission if their clients deposit 1,000 euros in cash, according to an “agent agreement” posted on its website. 

Furthermore, the way Freedom Holding funds its operations is not congruent with the typical practices of a company that can readily access $38 million in cash. The company’s banking and brokerage subsidiaries in Russia and Kazakhstan, operating under the Freedom Finance umbrella, are funding themselves through sales of short-term bonds with high interest rates — ones even as steep as 12 percent. Unless they have no other option, most corporate management teams would try to use available resources to reduce a drag on earnings from interest expense. 

Exactly what is Freedom Holding doing in Cyprus to make that kind of money? The Cyprus subsidiary’s primary operation is offering Freedom24, an online trading platform it touts as “an online stocks store.” Until earlier this year, Freedom 24 used fraudulent credit card processor Wirecard for payments. Cyprus is also where Freedom Holding has based its nascent Freedom Finance Europe division that’s aimed at capturing business from day traders and individual investors in the Western European market.

Even though the customers targeted are individuals who are new to trading or investing, Freedom24 and Freedom Finance Europe are bare bones offerings in comparison with the mobile applications offered by, say, InteractiveBrokers or TD Ameritrade. 

Partnering with a troubled company to execute trades

Furthermore, Freedom Finance Cyprus Limited is enlisting a brokerage that recently landed in regulatory hot water to carry out its trades: New York–based brokerage firm Lek Securities. The SEC alleged in 2017 that Lek Securities had improperly traded options for Ukrainian clients.

(In October 2019, Lek Securities’ co-founder Samuel Lek agreed to pay a $420,000 penalty and admitted to the SEC that he had broken federal securities laws. Lek Securities paid $1.52 million in penalties and disgorgement and also acknowledged a series of violations. FINRA, in conjunction with other U.S. exchanges, gave Lek a lifetime ban from the securities industry and fined Lek Securities an additional $900,000 for its supervisory failures.)

And Freedom Finance’s tight relationship with Lek Securities goes back years. SEC correspondence shows that in 2015 Lek Securities sought to act as a prime broker for a planned Freedom Finance brokerage in the U.S. named FFIN Securities Inc., for which it would process and match up its trades, as well as serve as a custodian for its securities. (Freedom Finance dropped the project the following year.)

In addition, with Freedom Finance unable to execute its own trades on U.S. exchanges, London-based Lek Securities U.K. Limited last year handled 90 percent of Freedom Finance Cyprus Limited’s equity orders, after doing 99.5 percent of them in 2018. 

Betting it all

Curious as to how such a sprawling operation, with units from Belize to Cyprus and from Almaty to Vegas, emerged? In 2008, while a 20-year-old university student, the Russian-born Turlov launched Freedom Finance in Moscow, and it catered primarily to Russian day traders. Turlov bought a small money management firm in 2013. 

In November 2015, Turlov merged Freedom Finance’s assets with those of Salt Lake City–based BMB Munai Inc., a dormant oil and gas exploration company that had (unsuccessfully) sought to export oil from properties in Kazakhstan. BMB Munia had for a while listed its shares for public trading in the United States. Turlov renamed the newly merged company Freedom Holding Corporation and incorporated it in Las Vegas. In October 2019, Nasdaq listed it on the Nasdaq Capital Market tier of early-stage companies. And just this past August, the company’s Kazakh brokerage unit, Freedom Finance JSC, purchased Bank Kassa Nova JSC in Kazakhstan. This joined the Moscow-based retail bank (FFIN Bank) that Freedom Holding had bought in 2017. 

In a September profile of Turlov, Bloomberg News noted that the financial services assets he had begun cobbling together in 2008 now amount to one of Russia’s 10 largest brokerage firms. A Bloomberg article from October 2017 is more illuminating: Turlov is revealed to have a riverboat gambler’s risk management practices.

Kazakhstan-based Freedom Finance JSC borrowed money using short-term repurchase agreements, pledging its (large) positions in the stocks of a handful of local companies as collateral. The Kazakh brokerage then used that money to expand its market-making activities (such as posting the prices it offers to buy and sell stocks) on the Kazakhstan Stock Exchange. 

This was an incredibly risky strategy. Emerging market equities are frequently thinly traded and volatile. Had the price of Freedom Finance’s pledged stock declined, the firm’s repurchase-agreement counterparties could have either immediately demanded additional cash as collateral or seized (and sold) the pledged shares, threatening the company’s solvency.

Yet as a chart of the Kazakhstan Stock Exchange index shows, Turlov’s gambit worked: Freedom Finance, the exchange’s busiest trader, profited handsomely when the stocks it made markets for gradually increased in value. Freedom Holding’s fiscal 2017 10-K annual report shows a securities trading gain of $23 million, to $33.74 million, from $10.8 million in the prior fiscal year.

– – – – – – – –

In the weeks prior to publication of this article, the Foundation for Financial Journalism sought comments from Freedom Holding. After Adam Cook, the company’s corporate secretary, declined to make Turlov available for a telephone interview, email questions were sent on Nov. 12 and again on Nov. 13. On Nov. 25, Ron Poulton declined to address them, citing the availability of information in its SEC filings and the company’s website. 

48 thoughts on “Freedom Holding: After ‘Borat,’ the Silliest Kazakh Import of the Century

    • Wow, this article is a real garbage, starting from the headline, probably it’s about time for the author to finish the ‘journalist’ career?

  1. Very good analysis. But I’m going to add more to that point: its Belize-based entity enables what basically is a Ponzi scheme. Clients send money to that firm to “participate in IPOs” and FFIN’s clients get unusually high allocations – i.e. 30% on the AirBNB IPO. How much do Morgan Stanley’s clients get (which if I remember correctly, was the manager)?

    I believe FFIN does not have any access to the IPOs. It simply writes bogus trade confirmations for its clients, who are happy they earned 100%+ a year on IPOs and almost nobody makes withdrawals. This attracts yet more clients and the pyramid builds up. Meanwhile the Belize-based company simply stores the money, which Turlov uses at his own will.

    • Actually we should check how much did clients of a large brokerage firm IB got on that Airbnb IPO. I heard they get quite a similar allocation on each new ipo as Freedom finance. I know some people who participate in IPOs through IB. Let’s see.

      Based on that fact above though, I believe freedom might have a factual access to IPOs. I also called Lek securities, and they did share that they call the underwriting banks and buy shares, but only in large quantities – and for large clients like FFIN. They didn’t confirm that they work with FFIN though.

    • Well, do you know allocations to other IPOs proposed by Freedom Finance besides ABNB? These are often 1-5% for MAJORITY of IPOs. By MAJORITY I mean about 90% of offerings FRHC proposes to participate in. This article SEEMS to be paid by short sellers and to provide a view only from one point. No illegal activities proved from FRHC side in this article.

      And, please, attach full correspondence with company reps next time, ok, Roddy?

      Customer of Freedom Finance since 2018.

      • “Ivan,”

        The full correspondence was attached. The only communication that was not included dealt with a brief (personal) note to Ron and Adam apologizing for my tone as I had been up late in the hospital ER.

  2. well despite these nasty comments I think your article is a brilliant example of investigative journalism. vivian, the editor of there are plenty of English speakers in Russia these days and if they cannot figure out how to abuse your work in English they can pay hacks to do so. right on!

    • Unproper comparisons with Google ( company of different size and other area of business) and US leading investment bank ( same area, but different region and different size). Company operates mainly on CIS markets ( in terms of clients citizenship), no any comparisons with similar companies was presented. On SoftWare markets there are a lot of companies with 50-70% margins, so what? These intentional or unintentional descripencies does not make me believe in reliability of facts in part 2 of artical. Revenue growth hier when word wide old companies in norm for growing markets of Breaks or CIS areas. Financial sector is in this area for them. Author can’t not know this specific. Asquizitions – during previous several years company made a lot of significan’t mergers on Russian, Kz, Ukraine markets ( not only banks but leading brokeredge companies). Usually this is one of ways how all companies increasing revenue fast. No any reference on that. Employees vs revenue analysis – in 2017 ( I may be wrong) company has merge NetTraider company with one of best SW for non- profetonal traiders ( in my opinion) on CIS market and extrapolate that on all companies of group. Most client since that time don’t use their managers for day-to-day activities.
      Client of Freedom as well, and they obtained me together with NetTraider.

      • Are you really a client of Freedom? Or of FFIN BS? Re-read your agreement to be sure.
        Haven’t you noticed that in case of any problems with Tradernet you are advised to contact any “.bz”? Whose daily record do you, client of Freedom, receive? FFin Brokerage Services?

  3. Good day. The client of the company since 2017, I have been working closely with the Ipo, the company has been working with the Ipo since 2012, it’s a pity that I didn’t come earlier, there have not been such articles since 2012, envy is bad 😊) If the scheme of work does not violate the rules of the regulator, then it working. I reinvest and withdraw my profit regularly, so the article contains deliberately false information. Although now is the time, negativity is an even bigger and hype advertisement. Although why FF advertising, only the lazy does not know what kind of company it is and how you can save and increase money with its help, my opinion.

  4. Thank you very much, I bougth their stocks at $10,5, and they grew up to 46, and thanks to your article they corrected to 41 now, giving me good opportunity to buy more.

  5. This is my broker , I started trading with them in June , invested 18k , today my portfolio is 52k , six month after. These guys are great , giving u access to IPO also , the allocation dropped due the number of clients , currently is around 2-5%.
    Do not believe to fake news , Freedom finance is a great broker .

  6. I’m a client of Freedom since 2011. My starting capital was around $110,000.. which grew up to $4,500,000 this year. (totally have several acc’s ~$10M now, thanks 2020!)
    That would be much more if I didn’t regularly withdraw money.

    You’ve listed some facts from the company statement which are indeed appear to be. But you made horribly wrong conclusions.

    >figuring out how to turbocharge revenue growth without triggering a concurrent spike in expenses or risk

    As saving account % rates are shrinking and the stocks are booming… there is an epic growth of clients in ALL brokers in the area (google this for 2019 and 2020). As a journalist, you probably heard of retail coming to the market? That happens not only in the US, you understand that, right?

    Nothing wrong with LEK. Fines are normal due to a lack of experience, not the “evil” thing. Merging LEK to the holding – why not?

    Wirecard part of the story is such a bullshit. The website used a popular top-up API to make payments to the bank/broker. After the fraud in Wirecard revealed they just removed it from the website. You would call everyone who worked with Wirecard the fraudulent company? You call yourself a journalist? really?

    As in 2020 Cyprus office/company is used less and less. It’s true from what I’ve heard. Nothing bad with that as there are now more optimal/cost saving/safe options for cashflows.

    >Reporting earnings that might be too good to be true
    You just don’t see the market from inside of it. I’ve started generating much much more commission this year. My activity tripled here.

    >transactions with Turlov-owned entities
    It’s easy to shout at such business practices, but if that saves money for the company and makes things done at much much less time… that works for me.

    I remember when Timur bought the company in his name to not lose time and then at some moment merged to the holding at no cost (no profit for him).

    Such events show me that nothing changed since 2011 when I first believed in him as CEO and Founder. Timur STILL makes things done with maximum efficiency. That’s truly great execution for his company and investors.

    Using Belize is not against the law. It just continues the paradigm of efficiency. Try to understand that. Think of Alibaba and Cayman Islands… and that’s a 250 billion company.

    Employees don’t use LinkedIn. In the US it is a way to get a promotion or a better job, so someone could hunt you. Here it’s not like that, so no need for everyone to be in it. So, that’s a false claim against the company.

    Fake, Ponzi, bad. Been hearing that since 2012, the IPO of Facebook…
    And yet, there were many many interviews with an explanation of how it works and why it works.
    Timur had how many…100, 200 flights to the US with his team of Lawyers, to make that happen?

    As a result: I just don’t see any fraud here. So, I don’t like your article.

    P.S. At the moment of writing I do own a very small amount of shares FRHC. I’d like to buy more at cheaper prices, but I just can’t stay silent when there is such fake news.

    • Lester,
      Is this the comment you claim was deleted? It arrived at 7:13 am U.S. EST and as all comments are moderated and approved, we just got to it now.

    • Using Belize is not against WHAT law? What country? USA, Cyprus, Belize, Russian Federation?
      Employees don’t use LinkedIn? Ha! They don’t see the difference between all those FFIN everywhere. As well as clients.
      I personally was completely confused when I singed the broker service agreement in Freedom Finance office. It was with FFIN Brokerage Services instead of Freedom Finance.
      O! Turlov is really brilliant selling FRHC shares through his own company. No chance for shorters!
      I was his client more then a year. He closed my account. I asked too many questions. I couldn’t get my money for more then a month after. I appealed to local enforcement to find that FFIN Brokerage and Turlov personally. I send a police confirmation that my letter received to . I got my money immediately. Obviously Turlov was not ready to communicate even with local enforcement. Law! What are talking about?
      Thank you Roddy! I hope this article will be the beginning of huge investigation.

  7. I like the title of the article.

    If you are a shareholder of FRHC US Equity, the best way to act is to hold your shares. Don’t sell them even if SEC will initiate an investigation.

    Keep calm.)

  8. The next step, on today’s session the management will push the price up to compensate yesteday price fall for the reason that all the rumors is fake news.

    It looks like reserves for $40 mln is not enough to cover all the simultaneous claims.

    Lets see.

  9. Deleting my comment is a true manifestation of freedom of speech. Thank you!

    My comment was one whole page long, as an answer to the article from my point of view and 10 years experience as a client with >$4M USD account.

    Plus I consistently do my due diligence on the company, as I’m holding a solid amount of money + I have many years of experience in reading forms on in order to understand the value of a company.

    But yes, you just delete my comment as it shows that you are wrong.

    • “Lester,”
      The only comments deleted yesterday were either obvious spam, written in Cyrillic, or in one case was absurdly personal (and did not try and comment on the article.) Send it again and I will post it if it is as well-considered as you claim.

      • Yeah, sorry. The interface first showed the comment published, then it disappeared. So I thought it is deleted. Now it’s clear that comments have pre moderation, sorry for False allegations.

  10. They are definitely scammers. Once you have taken money offshore, you are at great risk. Traded IPOs with them from 2014 to 2018. So don’t hesitate, once your account will be dumped sooner or later. One unsuccessful IPO like TNTR where you are given an allocation of 90% -100% and you are a loser after 10 successful IPOs where you were given an allocation of 5-10% (of course everything is random))). And Turlov has one answer, you will not prove anything, but theoretically a kitchen is possible, but we do not do that. Just study their financial statements and you will understand everything, for several years tens of millions of dollars were injected into the charter of the parent company from him, from Cyprus and Belize transactions (yeah, a talented trader)) I made my conclusions long ago, withdrew funds and work only with Interactive Brokers …

  11. These comments are HILARIOUS.

    It’s as if they don’t realise that their broken-English bravado is greater proof of fraud than anything the article was able to muster! It is too funny.

    “Me invest $1000 in 2012 and now after many successful IPO and much generous allocations, my account says I am richer than Beezos Jeff”

    Seriusly, you couldnt make this up. Is Sasha Baren Cohen writing these ?!!

    Great article thanks for your hard work

  12. Roddy, in your further research, don’t waste time on Freedom24. This site is a masterpiece of broker’s stupidity.
    On the company’s website, customers are still offered:
    – to buy shares of CBS Corporation at $50 per shares. The company has filed Form 15 in 2019 as far as I remember.
    -buy shares of Double Dragon Properties (?!?), but if you click on the icon, you will be transferred to shares of DuPont de Nemours, Inc
    -to buy shares of E* Trade Financial Corporation for $49.32 with potential growth of 13.47%.
    At the end of March shares of 21st Century Fox, filed Form 15 last year, has been removed from sale upon my persistent requests.

    It would be funny funny if it weren’t so sad.

  13. Roddy, in your further research, don’t waste time on Freedom24. This site is a masterpiece of broker’s stupidity.
    On the company’s website, customers are still offered:
    – to buy shares of CBS Corporation at $50 per shares. The company has filed Form 15 in 2019 as far as I remember.
    -buy shares of Double Dragon Properties (?!?), but if you click on the icon, you will be transferred to shares of DuPont de Nemours, Inc
    -to buy shares of E* Trade Financial Corporation for $49.32 with “potential growth of 13.47%”.
    At the end of March shares of 21st Century Fox, filed Form 15 last year, have been removed from sale upon my persistent requests.

    It would be funny if it weren’t so sad.

  14. Market capitalization of FHRC was artificially inflated by Turlov. Managers offered to their Kazakh clients to buy shares in exchange for higher ipo allocations in the not so distant future. Kazakh investors purchased these shitty shares and they will never ever be able to sell them at 44$ and will be stuck with them forever.

    • Lol this is completely fake. Now the price is 45 lol several days and it goes further up. Why you mislead people when they can easily check online.put FRHC ticker and watch. What would you say now Algerim?

  15. It’s scary that these companies are allowed to be listed. There really needs to be more stringent oversight and accountability to protect investors and prevent risky behavior (and fraud).

  16. So what, “Daniel”? Have you earned millions through ffin brokerage services inc., like “Ivan”? These shares is only bought by Russian and Kazakh clients. Not a single solid investor wouldn’t buy it, because frhc is trash, and Turlov is fraud. This article is completely true.

  17. Turlov registered the company on the stock exchange due to the fact that it would be difficult to sell the company’s shares on Russian and Kazakh stock exchanges in large volumes. However, he miscalculated. Trading volume remains unenviable.
    The Russian and Kazakh authorities, I think, do not care on the shares of which American company, in the end, buyers will voluntarily lose their money.
    The only thing they should be interested in is income tax. Freedom Finance clients probably pay taxes on their profits. And the profit, as every angry commentary here states, is serious. I hope that income tax is paid by FFIN Brokerage Services’ clients as well. Both RF and Kazakhstan definitely benefit with such a successful activity of FRHC and FFIN BS clients.
    As for those who want to withdraw their funds, read comments dedicated to Freedom Finance on the website. I read that the clients couldn’t receive their fund. It is not known whose clients the writers were. I repeat once again that FFIN clients sign brokerage agreements at Freedom Finance offices, and are absolutely sure that they are clients of the latter. Then they complain that Freedom Finance employees refuse to communicate with them.

    Everyone can calm down: none of you who made comments in favour of of Freedom Finance are its client. Probably you are shareholders of FRHC. To bend in front of Turlov will not help either, he has only his own personal interest. And it is hardly possible to complain about the FFIN BS (Belize) to the Belizean legislature in the event of a default. It is only important for Belize law that none of its citizens is involved in the activities of a company FFIN BS registered in Belize. And no citizen is involved. At this point Turlov observes the laws of this state.
    One thing pleases: the article was distributed among both the management and clients of Freedom Finance. Perhaps Turlov will have less opportunity to fool people with his achievements and ratings.

  18. Today I got a call from one Freedom Finance employee. He was so excited with this purchase of Prime Executions Inc. He told me that “the trading platform will be more efficient, less costs of fee” and so on… I didn’t understand how the acquisition of agent-only broker can improve the business from those points. One more question: how Prime Executions Inc meets the requirements of BLUE LINE business being fined for violations of several rules?–%20fully%20executed_final.pdf

  19. FINRA has allowed Freedom Finance to acquire Prime Execution(US trader). Do you think it is a sign that Freedom Finance is a reliable company? FINRA must have checked Freedom Finance before allowing them to purchase Prime Execution.

  20. At the end of April, my immediate supervisors in Freedom Finance sent letters addressed to me and containing all my personal information to me and several more respondents. One of those respondents was my editor hired three days ago. I was indignant and had to contact Mr. Turlov directly. Despite the fact that I have never been a Freedom Finance client, I was unhappy that many people had access to my personal data. It is especially unacceptable for an investment company.

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