In a complaint lodged with the Geneva-based Swiss Attorney General, Nicolas Giannakopoulos, who is known the world over as an expert in investigating financial crimes, has pointed fingers at SoftBank President and COO Alok Sama and the company’s former COO, Nikesh Arora, of hacking the website of his company Global Risk Profile Sarl and stealing the data of his clients.
According to documents made available to Janta Ka Reporter, Giannakopoulos has alleged that several targeted attacks had been made on the website of the Geneva-based company since August 2016.
In his four-page complaint, Giannakopoulos alleged that he had confirmed information that two companies had hired hackers to illegally obtain data from his company’s website and many of these coordinated attacks were conducted using an IP address believed to be located in India.
Global Risk Profile Sarl enjoys an enviable reputation for its specialisation on conducting research, doing due diligence and analysing and processing information. That their website has allegedly been hacked and data pertaining to their clients compromised came to knowledge of the company when some of its employees discovered a blog article running by the title “Dark web hackers offer up customer data from Global Risk Profile hack”.
The blog claimed that a group of hackers using Dark Web was selling data obtained from the company’s website, including emails exchanged between the company and its clients. For the uninitiated, Dark Web is an expression which designates internet content that can be accessed with specific software and permission.
Averring that both the hacking and the blog article with its defamatory claims could be part of a global attempt to harm his and his company’s reputation and image, Giannakopoulos has raised a pointing finger at Nikesh Arora, former President and COO of SoftBank, and Sama as the brain behind these attacks.
Claiming in his complaint that he is locked in a dispute with SoftBank “and more specifically with the former president of Softbank, Nikesh Arora” and his former colleague Sama, Giannakopoulos says that he “does not exclude the possibility that SoftBank itself or individuals within said multinational company are behind this clumsy attack.”
Indeed, a letter targeting the allegedly illegal behavior of Alok Sama, Arora’s partner and ‘protégé’, was sent to the SoftBank Board in Tokyo by Giannakopoulos’s American attorney, Guirgis of Mintz & Gold in New York on August 25, 2016”, five days before the hackers began their attacks to hack his company’s web site.
And the location of the IP address in India and the date of the beginning of cyber attacks as claimed by Giannakopoulos in his criminal complaint filed through his attorney may not be a coincidence, as one may believe.
According to information shared with Janta Ka Reporter, Giannakopoulos in a letter addressed to the SoftBank Board of Directors in Tokyo had, in fact, blown the whistle on the not-so-illustrious past of both Arora and his protégé Sama, and questioning their appointment in decision-making positions at SoftBank had sought the termination of the entire team that Arora had put in place before he was forced to resign last year in June, barely 20 months after he joined SoftBank in September 2014.
Giannakopoulos made this representation after half a dozen letters shot between January 2015 and October 2016 by an anonymous group of SoftBank shareholders were cold-shouldered by the Board of Directors. In their January 20, 2015 letter sent through the US-based law firm Boies Schiller & Flexner, these shareholders had questioned the hiring of Nikesh Arora, Alok Sama and other members of their team.
Arora and his inflated investments
Pointing to Arora’s ties with the private equity, these shareholders had also questioned his investment decisions. Hardly a month Arora joined as President of SoftBank, the Japanese telecom giant invested US$ 210 million in taxi app Ola and US$ 627 million in e-commerce company Snapdeal.
These investments were followed by a US$100 million infusion in Indian real estate start-up Housing.com and US$ 120 million in Grofers, a cyber grocery delivery store, in November 2015. It is alleged that Arora had a personal stake in Snapdeal.
However, all these companies are in red barely a year after they received these investments, and it was no surprise that SoftBank in November last year marked down the value of its investments in Ola and Snapdeal by US$ 550 million which showed that these start-ups were overvalued. The question is where all these millions have gone?
Apart from these investment decisions, there was a conflict of interest, shareholders have alleged, as Arora is a senior advisor with private equity firm SilverLake Partners.
Arora and Sama’s Conflict of Interest
In a clear case of conflict of interest, for instance, Arora decided to put in SoftBank’s money to the tune of US$ 250 million in WME-ING in March 2016, while SilverLake Partners already owned a 51 per cent stake in the US-based talent and sports agency.
High placed sources say that SilverLake and Google invested in Zynga soon after SoftBank invested US$ 150 million in July 2010 in the gaming company and Arora and his friends made a fortune when they sold their shares at $12 each before they came crashing to a paltry $3.
In another confidential letter, these shareholders had “identified SoftBank’s investments arranged by Nikesh Arora and Alok Sama, including Snapdeal, as questionable in light of Nikesh Arora’s pre-existing personal stake in the target companies.” Pointing to the SoftBank’ November US$ 550 million mark-down of Ola and Snapdeal investment, the shareholders had alleged that “SoftBank’s valuations of Snapdeal and Ola were excessive, possibly because Mr. Arora stood to gain personally from SoftBank’s investment in those companies at their exaggerated valuations.”
It is interesting to note that Arora hired Sama as CFO of SoftBank in June 2015. But before that, Sama was appointed an investment advisor and was paid a hefty fee on Softbank’s Snapdeal investment in October 2014, hardly a month after Arora had joined SoftBank.
Arora’s high-profile stint, during which he enjoyed a pay packet of Rs. 500 crore a year thus making the third highest paid execute in the world, with SoftBank ended abruptly in June 2016, upon which Sama succeeded him. A month later, SoftBank acquired British chip designer ARM Holdings for more than US$ 32 billion. It is worth mentioning that no sooner had Sama assumed office as CFO with SoftBank, these shareholders had begun raise concerns. But nothing would spur the SoftBank Board into action. Obviously peeved, Giannakopoulos, who is one of the shareholders of SoftBank, shot off a missive to the SoftBank Board of Directors.
In this letter, Giannakopoulos has labeled charges against Sama of dubious offshore financial transactions, conflict of interest as an investor of SoftBank’s M&A advisor Raine Partners and money laundering while working with Delhi-based real estate company Vatika Ltd. Declaring Sama, who he alleges was hired without due diligence, to be unfit for the job, Giannakopoulos questioned Sama’s “dubious offshore financial arrangements”.
In this letter, Giannakopoulos alleges that Arora hired his friend Sama for SoftBank subsidiary SB Internet and Media Inc. (SIMI) at a monthly pro-rated pay of US$ 175,000 which was increased to US$ 250,000. This fee was paid to Sama through Kensington Capital International, a British Virgin Islands company, even before he was “formally hired”.
Apart from this pay, Sama was paid a “success fee” of US$ 3,000,000 again through Kensington Capital International for “advisory services in connection with three investments made by SoftBank Corp.” even though “the negotiations and much of the groundwork resulting in these three investments were completed before” Sama began working for SIMI. However, these “payments were not decided by the remuneration committee,” alleges Giannakopoulos.
Sama was paid US$ 4,600,000 in a period of six months between September 2014 and March 2015, the letter alleges, even as he was yet to be formally hired. Alleging that “The use of BVI vehicle, the lack of transparency linked to Sama’s role, and significant remuneration are all strong signals of potential illegality”, Giannakopoulos asks if Sama was the sole beneficiary of such large sums in fee and says: “We have reason to believe that this question is the subject of an official inquiry in Switzerland concerning alleged money laundering.”
Questioning SoftBank’s hiring of Raine Partners, in which Sama is an investor, to advise it on mergers and acquisitions, Giannakopoulos categorically alleges that Sama “has not played fair and transparent with SoftBank in the various instances we have been able to reconstruct, notably his relationship with Raine Partners and with a SoftBank subsidiary, both organized from the shell companies hosted in Neuchătel, Switzerland.”
Alleging a conflict of interest, the letter says: “To the extent Alok Sama is the reason for SB’s selection of Raine Partners as M&A advisor and the incredible sums being paid to the small advisory company, it reflects a conflict of interest.” It further says: “Such a conflict leads to question the legitimacy of the sum paid to Raine Partners and the potential misuse of those funds.”
What Giannakopoulos alleges next brings to light how Sama was instrumental in a US$ 150 million an investment in Vatika Ltd. in 2008. This investment was made through Beacon Vatika Holdings Limited (BVHL), a Mauritius-based vehicle co-promoted by Dubai-based Baer Capital Partners and Goldman Sachs. Sama co-founded and headed Baer Capital Partners before he joined SoftBank Group Corp. and is still functioning as a senior advisor to and director on the Board of Baer Capital Partners.
Giving a detailed account of Vatika which has been mired in the Vadra land scandal, Giannakopoulos alleges that the company has been facing more than 90 litigations in various courts, at the district and higher levels, including the Supreme Court, and Income Tax tribunal.
In all 10 Vatika sister concerns such as Vatika Financial Services, Vatika House Finlease, Vatika Portfolio, Vatika Spinning Mills, Vatika Hospitality, Vatika Comple, Vatika Hotel, Vatika Construction, Vatika Grand and Onkareshwar Pvt. Ltd. are embroiled in litigation. The letter alleges that during the period 2011–2016 “Vatika, M. Alok Sama, and Onkareshwar were involved in 5 cases at the Supreme Court of India”.
Thus recording Sama’s involvement in the affairs of Vatika, Giannakopoulos alleges: “In addition to M. Alok Sama’s apparent role in the political scandals questions have arisen concerning alleged money laundering scheme – including one relating to a USD $41 million investment made under M. Alok Sama’s authority with no explanation for the use of the funds whatsoever.”
Giannakopoulos cautions SoftBank: “Such scandals obviously could affect SB’s reputation around the world and particularly in India where the Group has the ambition to develop a strong presence. But more generally, we believe that such a lack of transparency in the operations led by M. Alok Sama is not compatible with his current position as director of foreign investments with SB – to say the least.”
Case against Arora and Sama
The letter is categorical while stating that Sama may even be dangerous as his continuation in his position can “cause SoftBank to face the risk of potential sanctions”. Giannakopoulos says conclusively: “In our opinion, it is inconceivable that any serious company – SB in particular – could keep as its Chief Investor a person involved in more than 90 judicial procedures, especially in a country like India where SB is already investing and has an ambition to expand its business and influence by working with the Government.”
Raising serious concern about the undue influence that both Arora and his aide Sama have on SoftBank Group, Giannakopoulos says: “Yet another concern is and remain M. Nikesh Arora’s overall influence on the Group, as well as his ability to obtain inside information from his thigh relationship with his friend M. Alok Sama.” Janta Ka Reporter has also come to know that a complaint has also been filed with the Enforcement Directorate, talking of an “ecosystem” allegedly nurtured first by Arora and then by Sama to the detriment of the interest of both SoftBank Group Corp. as an investor and India as an investment destination.
The complaint seeks an investigation by the agency into the deeds of Arora and Sama under various laws, such as FEMA and Money Laundering Act.
While the information made available to Janta Ka Reporter, indicates that Arora’s exit from SoftBank may have been unceremonious and could have been taken due to these serious allegations of impropriety raised by shareholders and Giannakopoulos, it is bewildering to see that SoftBank has not acted to clean its stables and instead has chosen to look other way round while Arora’s protégé and the rest of the team under him continue to function in their influential positions.
What it means for India
After already committing an investment of US$ 10 billion, Softbank is set to invest US$ 20 billion in India’s solar sector to produce 20 GW of power, in line with PM Narendra Modi’s call to produce 200 GW of clean energy in the next decade, while setting up a US$ 100 billion Vision Fund, with Delhi marked as one of the global hubs of this Vision Fund. With such ambitious plans for India, and with major global investors watching closely every move that its founder-Chairman Masayoshi Son is making with regard to India, it will be in order for the Indian government to act decisively on the complaint to send out a message to global investors that its means business.
(We’ve contacted SoftBank, Giannakopoulos, Nikesh Arora, Alok Sama and Vatika Group for their reactions. We will update the story with their reactions as soon as we get them)