Freedom Holding’s Sudden Transparency Raises Bigger Questions
The company’s singing like a canary on itself now – But why?
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Warning on a Newly Disclosed SEC Investigation
Summary & Opinion:
Heads up – One of the dirtiest companies we follow and warned on repeatedly has given us a gift. Freedom Holding (FRHC) finally disclosed the SEC investigation we first found in October 2021. As one does when in the company of a pack of thieves, we’ll adopt the vernacular and note Freedom Holding is now singing like a canary about its own SEC investigation. But why? This level of detail and transparency is way out of character for this company. We have an idea or few on this.
To us, even in this light-touch SEC environment, it’s clear Freedom Holding’s SEC investigation has gone south.
If correct, this disclosure reads more confessional than anything else. It’s that “come-to-Jesus” disclosure your lawyers craft for you to provide defenses later – you know, when things go bad and investors try claiming they were left in the dark. Therein lies the gift. It appears insiders know bad news is coming. Soon. Very soon.
From the Freedom Holding 10-Q filed 09-Feb-2026:
Since 2021, the Company and certain officers and directors have received several document subpoenas, document requests and subpoenas and requests for testimony from the SEC’s Division of Enforcement. The requested information relates to a number of topics, including the settlement practices and relationships with certain institutional market makers of certain of non-U.S. broker-dealer subsidiaries, and has included our accounting practices, disclosures, and internal controls. The matter is ongoing, and the Company is cooperating with the SEC. The Company face risks and uncertainties relating to the duration, outcome or impact of the inquiry on its business, including the amount of any fines or other penalties. Any of the foregoing could, individually or in the aggregate, materially adversely affect, the Company’s reputation, business, financial condition, results of operations, prospects, and cash flows.
DI’s Take:
We received our early signal of an undisclosed SEC investigation at Freedom Holding in Oct-2021 and warned repeatedly on it since. We went further, also calling this one of dirtiest companies we follow. Its investigation now disclosed, FRHC is removed from the DI Watch List of companies with undisclosed SEC probes.
Given the history we found here, this first-time disclosure of its long-running SEC investigation is not likely indicative of a company newly committed to transparency. It was already under investigation by the time Hindenburg Research issued its warning in Aug-2023. Yet the company said nothing about SEC involvement then – nor when rebutting that report in Jan-2024.
There’s also no disclosure language to suggest the SEC investigation is nearing its end, nor is it likely to close with a wrist slap or small penalty. Instead, Freedom Holding warns of a wide array of potential consequences from the SEC probe, some of which could easily be severe.
Developments of Note:
Like us, the auditor had concerns years ago at Freedom Holding. In Jul‑2022, the auditor at the time declined re‑appointment for the fiscal year ending 31‑Mar‑2023 — and bolted much earlier, at the end of the Jun‑2022 quarter. That is extremely rare. Apparently, the auditor saw enough to want out fast.
DI’s Early Signal of undisclosed SEC probe: Oct-2021.
Abrupt departure of auditor: Jul‑2022.
Two restatements: Nov-2022 and Mar-2023.
Long-running internal controls problems.
Multiple delayed SEC filings (10 Ks and 10 Qs).
Repeated Nasdaq non-compliance/de-listing notices
Big fat raises for C-suite executives announced same day of a second delisting notice: Aug-2023.
Hindenburg Research warning, Aug-2023,Brazen Sanctions Evasion, Hallmarks of Fabricated Revenue and Risky Bets with Commingled Customer Funds
– John P. Gavin, CFA, NACD.DC
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