SIF Real Estate - a case that illustrates the sorry state of our capital market

English Section / 30 iulie 2020

SIF Real Estate - a case that illustrates the sorry state of our capital market

The difficulty in dealing with these cases of manipulation and fraud lies in the fact that many words are needed.

The cases, in themselves, are merely scams.

But, because they mimic compliance with the law, and the deals are set in motion after counseling from legal advisers, it is not advisable to get in the scammers' faces yelling "liar !, bastard !, common thief!" or whatever words you can think of, and it's not good to spit on them or slap them, when you accidentally meeting them at a "Dress code: Black Tie" reception.

No, you need a lot of weasel words and the same applies when attending the reception.

But that shouldn't confuse you.


The frauds and manipulation that I am going to write about here are not stories unknown to the market, they even have a notoriety that causes them to make the rounds in the anonymous comments posted by the readers of the BURSA newspaper.

Here is an example from July 13, 2020, on my article "The ASF allows criminals to roam freely through the capital market - ASF permite infractorilor să zburde în voie prin piaţa de capital":

"2.2. untitled (response to opinion no. 2)

(message sent by anonymous)

The SIFI stock is 4 times more valuable than its book value, reaching a capitalization of 262 million Euros. Can't Grădinărescu's experts see that? Isn't that called disinformation and manipulation ... and that is putting it very mildly? ...speaking more crudely, that is called a scam.

OK, let's return to our SIFI scam.. When SIF Imobiliare plc was created, with the goal of using the fiscal optimizations provided by a financial holding, which they claimed couldn't be done in Romania, there were 6 stocks that didn't enter the ownership of SIF1, directly, but they did so indirectly. Bistriţa SA, Complex Laboratoare, Arta Culinare, Agrorent, Comalim and Administrare Imobiliare each held 1 share, and they were part of SIFI.

In the six years of performing management, the following happened:

Bistriţa SA remained Bistriţa SA, and didn't do much, merely a combined profit of about 120,000 RON in 5 years;

Complex Laboratoare reorganized into SIFI CJ OFFICE, and managed to rack up a loss of about 1.3 million lei following the performing management;

Culinary Art has turned into SIFI CJ RETAIL and is a small gem, making a cumulative profit of about 13 million lei;

Agrorent no longer exists, it was absorbed by merger by another company;

Comalim still exists and has made a cumulative profit of about 800,000 lei in the last 5 years.

Administrare Imobiliare, the company that manages SIFI and all the entities in the SIFI portfolio, was capitalized through SIF1 via SIFI with about 42 million lei, and in the years of outstanding management of at least 30 entities it brought SIFI a cumulative profit, which is in fact a loss, of 1.2 million lei.

These are the shareholders, managers and achievements of a company that is worth 52% of SIF1.

These are the shareholders, administrators and achievements of a company worth 52% of SIF1.

Yes, this is the parallel SIF created by Lakis, together with all of his gang of criminals, who have been cannibalizing SIF1...the strategy that SIF5 will not be able to avoid if it enters under the performing management of SIF1 and SIF4".

Yes, this is the parallel SIF created by Lakis, along with all that gang of criminals, who cannibalize SIF1 ... the strategy that SIF5 will not get rid of if it enters the performance administration of SIF1 and SIF4 ".

These are the kinds of comments that appear below our articles, about the "special relations" which the management of the Financial Oversight Authority (ASF) has with the Lakis/Drăgoi pair.

Instead of forbidding Lakis to operate on the stock market, at least for the duration of his sentence (for market manipulation and money laundering), the ASF allows the offender Najib el Lakis to advise Bogdan Drăgoi, the president of SIF Banat Crişana, who also controls the management of SIF Muntenia, and now, everybody knows it, also controls the decisions of the General Shareholder Meeting of SIF Oltenia, through the bunch of investment funds created using the money of the two SIFs (Banat Crişana şi Muntenia), which the ASF has constantly refused to declare as acting in concert, despite all the evidence.

The perception created by this situation is that Drăgoi is only a proxy for Lakis, who seems to be playing the part of the "mastermind" of the expansion maneuvers of SIF Banat Crişana, which the ASF tolerates, although their legality is at the very least questionable (the term "questionable" is the one lawyers recommend using, as long as there is no conviction).

Such comments appear at the bottom of our articles about the "special relations" that the management of the Financial Supervision Authority (ASF) has with the Lakis / Drăgoi couple.


In the list of valuations of the net assets of the five SIFs, on June 30 2020, the one of SIF Banat Crişana (SIF 1), which is the highest, stands out:

- SIF1: 3.522 billion lei;

- SIF2: 1.851 billion lei;

- SIF3: 1.024 billion lei;

- SIF4: 1.459 billion lei;

- SIF5: 1.873 billion lei.

A newbie who saw the Romanian stock market for the first time, would exclaim "Wow, SIF1 is almost five times more valuable than SIF5!".

When they read the site of the AAF (Asociaţia Administratorilor de Fonduri - The Association of Fund Managers), the newbie would be officially informed that the only SIF that saw its net asset increase in 2020 is SIF Banat Crişana.

And in the case of all the others, it decreased.

"Wow!, that's some outstanding management at SIF Banat Crişana", the newbie will exclaim.

Then they will look at the discount compared to the NAV, on June 30, 2020:

- SIF1: 66.84%;

- SIF2: 30.34%;

- SIF3: 23.82%;

- SIF4: 61.82%;

- SIF5: 31.87%.

and then, the newbie is floored!

The NAVPS reported by SIF Banat Crişana on June 30 2020 is 6.84 lei, and the stock trades at at 2.27 lei.

Let's jump in!

Let's buy SIF Banat Crişana with both hands - we'll make money for sure, we're getting it three times cheaper than its actual value!!!

And look at how quickly its NAV is rising!

We'll make a killing!

In reality, these proportions are knowingly distorted by the manager of SIF Banat Crişana, they are promoted by the Association of Fund Managers and tolerated by the Financial Supervisory Authority, where I doubt that Gabriel Gradinescu understands what it is about and how serious the crime is, but Claudia Cătălina Sava certainly knows how to write and read.


My colleague Andrei Iacomi has dedicated a thorough article to the way that the net asset of SIF Banat Crişana is inflated by billions using one transaction of just one share in SIF Imobiliare, a company headquartered offshore, listed on the Aero market, which has a free-float of 13 shares:

"On May 19, a transaction takes place with 1 SIF 1 share, at the price of 286 lei, up 30% over the price of the last transfer, of April 25, 2019, which raises the capitalization of SIF Imobiliare to nearly 1.287 billion lei, compared to 990 million lei, like it used to be."

The management of SIF Banat Crişana itself declares it is concerned that this kind of increases coming from one transaction with SIF Imobiliare have the ability to mislead investors and turns to the ASF for a solution to the case, but the former buries it.

But despite its concerns, SIF Banat Crişana uses its inflated assets for reporting, which it benefits from.

I don't know what it's called, market abuse, market distortion, market manipulation, but I am sure it is an offense.

It is the responsibility of the manager of SIF Banat Crişana, the ASF, the AAF and the BSE.

1) The fund manager, which actually shows it is aware of the distortion, should be calculating the NAV of SIF Banat Crişana without the influence of a one share transaction; the influence of the transaction with the SIF1 share in the value of the net asset of SIF Banat Crişana has been so far, of over 1.083 billion lei, meaning, without it, on June 30, 2020, the NAV is actually 2.435 billion lei, and not 3.522 billion lei; but two billion leaps follow, because two more trades have been made since then.

2) The ASF should have self-notified, because that is its purpose, supervision; but the ASF not only did it self-notify, but it didn't want to take notice even when SIF Oltenia presented the case and explained it very clearly, in a Report submitted in the General Shareholder Meeting at SIF Banat Crişana, one year ago, zero reaction, the manipulation is unfazed.

3) The AAF should have realized it is allowing itself to be a tool of market manipulation and that it is endorsing the distortion in the eyes of investors; the reporting is obviously misleading, even if it apparently is in agreement with the law.

4) What is the most interesting is that the BSE has its share of the blame in the case: the executive of the BSE should have noticed the destructive potential of this distortion of the NAV discount in the shares of SIF Banat Crişana and could have put an end to that mechanism, by intervening in the Aero market; the executive has the capability to set trading blocks and could have prevented transactions with just one share, like the ones that happen at SIF Imobiliare; the mere obligation of trading in blocks of, say, 50 shares, would have led SIF Banat Crişana to participate in trades with SIF1 shares in its own portfolio, exceeding the current freefloat of 13 shares, which would have prevented the fund manager from claiming it has no idea who the seller is.


BURSA reported that SIF Banat-Crişana (SIF1) and SIF Muntenia (SIF4) sent SIF Oltenia (SIF5) a new notice to convene the General Shareholder Meeting, in order to fire the managers, and the notice to attend is almost identical to the one sent in June, as shown by the report sent to the BSE.

In their eagerness to dominate SIF Oltenia, Lakis and Drăgoi have invested in shares in unlisted companies (such as the investment funds through which they hold the controlling stake in SIF5) and they got ahead of themselves, exceeding the 20% cap of the NAV, allowed by ASF Regulation no. 15/2004 (article 188).

Nobody would have been worried with such a small nitpick, neither Lakis or Drăgoi and much less so ASF vice-president Gabriel Grădinescu, this golden boy who watches anything but the market.

But Tudor Ciurezu, who is (still) in office, has found it appropriate to notify the ASF that for some time now, SIF Banat Crişana has not been in compliance with the law in that regard, either.

It is unknown how that happened, but all of a sudden, Lakis and then Drăgoi realized the problem.

Since Lakis in particular always wants to strictly comply with the law (he hasn't had much luck with that), SIF Banat Crişana effortlessly became compliant - somebody sold one share in SIF1 and done, the NAV increased enormously, and the 20% proportion was complied with.


I think I wrote many words, avoiding those of turpitude, crookedness, corruption, lie, which aren't used at the "Dress code: Black Tie" receptions.

But I find this case of a seriousness that is beyond words.

I am tempted to say that "in my time" something like that couldn't have happened, but the example of the FNI which was using bearer shares to inflate its NAV by exactly 2% a week.

But I don't think it would have been possible during Gabriela Anghelache's term at the CNVM.

I think our Romanian stock market is going through a crash.

I think that the ASF is as corrupt as can be.

I think that the stock market community has become ruled by the cynical fakeness and the boorishness illustrated by the sordid, insulting comments that blow up on every article that hurts the interests of some zombies.

I think that there are people in the market who are in fact veritable criminals and they are allowed to roam around freely.

Such a market could however, be extremely attractive.

Of course, for mobsters.

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