Saudi Arabia’s Ponzi Scheme Epicenter: Court Rules Ahab Complicit in $330BN Fraud

A Cayman Islands court has dealt a crushing blow to Saudi conglomerate Ahmad Hamad Algosaibi & Brothers’ (AHAB) claims against the Saad Group, ruling that AHAB was an active participant in a multi-billion-dollar fraud scheme. This verdict comes as part of one of the largest Ponzi schemes in history, with estimated losses running into nearly $330 billion since 1981.

The Scheme’s Origins

According to court documents, AHAB’s default on $9 billion of debt in 2009 was just one aspect of a massive fraud orchestrated by Saad Group founder Maan al-Sanea. Al-Sanea, who married into the family business in 1980 and managed its financial assets, allegedly engaged in unauthorized borrowing on an industrial scale.

The Court’s Ruling

In dismissing AHAB’s claims, Cayman Islands Chief Justice Anthony Smellie described the scheme as “one of the largest Ponzi schemes in history” involving nearly $330 billion that flowed through the firm since 1981. The judge found that the scheme was so complex it could not be unwound and ruled out AHAB’s $4 billion claim and a $5.9 billion counterclaim by Saad Group, which included a $4.49 billion promissory note purportedly issued by AHAB to Saad Group unit Singularis.

The Consequences

The ruling is a major setback for AHAB, which had sought to recover losses from al-Sanea personally. A previous $2.5 billion judgment obtained by AHAB against al-Sanea in 2012 remains in place, but the latest verdict means that none of the assets in Cayman can be paid to AHAB’s creditors.

The Scale of the Scheme

The scheme’s sheer scale is staggering:

• AHAB took out over 12,500 loans between 2000 and 2009.
• By the time the firm defaulted on its debt in 2009, it was maturing at a rate of 20 per day.

Ongoing Fallout

The ruling comes as banks in the UAE and Saudi Arabia move towards settlement plans relating to both AHAB and al-Sanea himself, who is being held in prison due to the $7 billion of debt owed by Saad Group. Combined, the two companies are estimated to owe over $22 billion to more than 100 international banks, contractors, and thousands of staff.

Auction of Assets

An auction of vehicles and other assets owned by al-Sanea’s family in Al Khobar is set to begin in March, with proceeds going towards repaying around SAR18 billion ($4.8 billion) owed to creditors.

Next Steps

As the dust settles on this epicenter of Saudi Arabia’s debt dispute, it is clear that the consequences of this Ponzi scheme will be felt for years to come. With an automatic right of appeal set to be heard in 2019, AHAB may yet have another opportunity to challenge the ruling. However, for now, the verdict marks a significant victory for Saad Group and a major setback for AHAB.