Background of the Company: Brooge operates an oil storage facility in Fujairah, United Arab Emirates (UAE) and is publicly traded.

Public Listing Through SPAC: Brooge became a public company via a special purpose acquisition company (SPAC) transaction in December 2019. During the relevant period (2018 to early 2021), a significant portion (30% to 80%) of Brooge's reported revenues were found to be unsupported and materially misstated.

Fraud in Fifteen Seconds - Quick Overview

Fraudulent Activity: The core of the fraud involved the creation of two sets of invoices:

• First Set: Genuine invoices for customers who used Brooge’s storage services.

• Second Set: Fabricated invoices with inflated rates and volumes, allegedly sent to non-existent customers. These were “paid” through complex transactions involving affiliated or related parties.

Role of Senior Management: The company's former CEO, Paardenkooper, and former CSO and Interim CEO, Saheb, were either aware of or recklessly ignorant of this accounting fraud.

Auditor Deception and Further Fraudulent Actions: Certain Brooge personnel provided only the fraudulent set of invoices to outside auditors, along with falsified ledger entries and other documents to support these false claims. This misled the auditors about Brooge’s actual revenues. Additionally, to prevent a default on bonds issued in the Nordic market, the company created even more unsupported invoices and falsified documents, especially during the investigation period.

Background of Business Transactions

Business Combination with SPAC:

• On April 15, 2019, Brooge and its subsidiary BPGIC entered into a Business Combination Agreement with a SPAC, which had raised $180 million through an initial public offering (IPO).

• On November 25, 2019, the SPAC filed a proxy statement including BPGIC's historical financial information. However, the revenue figures for 2018 and the first half of 2019 were overstated. The SPAC, based on BPGIC's historical and projected financial performance, valued the proposed transaction at around one billion dollars.

• These inflated revenue figures were presented to investors during roadshows in the U.S. The business combination closed on December 19, 2019, with a share price of $10.32. Most SPAC shareholders redeemed their shares for cash, leading to Brooge receiving only $16.7 million from the transaction.

Bond Issuance:

• On September 24, 2020, BPGIC issued $200 million of 5-year senior secured bonds in the Nordic bond market. These bonds, unregistered and offered to Qualified Institutional Buyers (QIBs) under Rule 144A and to non-U.S. investors under Regulation S, are set to mature in September 2025 and have a semi-annual coupon rate of 8.50%.

Registration Statements:

• On April 15, 2021, Brooge filed a post-effective amendment to a previous registration statement, related to the issuance of common stock underlying over 21 million outstanding warrants issued after the SPAC business combination.

• On April 19, 2021, Brooge filed a Form F-3 shelf registration statement, registering the offer and sale of up to $500 million in various types of securities. This also included the potential sale of up to 6 million shares by an affiliated selling shareholder, the majority shareholder of Brooge.

• During the Commission's investigation, Brooge agreed not to issue securities under these registration statements.

Potential Acquisition Proposals:

• On August 17, 2022, Brooge announced that its majority shareholder, BPGIC Holding Limited, expressed interest in acquiring all the shares it didn't own to take Brooge private.

• In October 2023, Brooge disclosed receiving a formal proposal from a maritime and shipping company listed in the Dubai Financial Market to acquire the company. This acquisition is under evaluation and expected to close in the fourth quarter of 2023.

How the Fraud Went Down

Brooge's Revenue Overstatement - Customer A Invoices

False Representation of Revenue:

• Brooge claimed to investors, bankers, and auditors that it had a single customer contract obligating the rental of 100% of its storage capacity and certain other services at specific rates, which would generate approximately $44 million per year.

• In reality, the actual usage of the storage capacity by real customers was much less, and the rates were lower than those specified in the supposed single-customer contract.

Accounting Scheme with False Invoices:

• To bridge the gap between actual and reported revenue, Brooge relied on a scheme involving a false second set of invoices.

• Between December 2017 and December 2020, Brooge recognized revenues improperly by issuing invoices to two entities: Customer A and Al Brooge International Advisory LLC (BIA).

Customer A Invoices:

• Customer A, a Singapore-based private company allegedly in the crude oil business, supposedly leased the full storage capacity of BPGIC's facility. However, Customer A never used the storage or paid any fees.

• BPGIC created fake invoices to Customer A, matching the total amounts of actual invoices to real customers but adjusting the rates and volumes to match the contractual terms with Customer A.

End-of-Month Invoices to Customer A:

• To fill the revenue gap, BPGIC issued large, false end-of-the-month invoices to Customer A from January 2018 through July 2019.

• These invoices were never paid by Customer A. To simulate payments, BPGIC engaged in circular transactions with BIA, an affiliated entity, creating the illusion of payment by Customer A.

Role of BIA:

• BIA, based in Abu Dhabi, was an affiliated or related party to BPGIC, with one of its owners being a shareholder in BPGIC.

• BIA had no significant business activities other than participating in the scheme to misstate BPGIC's revenues.

The BIA Invoices

Novation of Contract to BIA:

• In August 2019, BPGIC's contract with Customer A was transferred (novated) to BIA under similar terms. According to this arrangement, BIA was obligated to lease the full storage capacity of BPGIC's fourteen tanks, amounting to 399,324 cubic meters, at a rate of $5.00 per cubic meter for storage and $1.70 for certain ancillary services. However, like Customer A, BIA never actually stored any oil with BPGIC.

Continuation of False Invoice Scheme:

• BPGIC continued to service actual oil and gas companies using its storage facility but at rates and volumes significantly lower than those mentioned in the contract with BIA.

• A second set of invoices was created, addressed to BIA, which mirrored the total amounts of the real invoices sent to actual customers. These false invoices used the higher contractual storage rate of $5.00 per cubic meter, with adjusted storage quantities to match the totals. Some of these invoices also mischaracterized ancillary services as storage fees.

• Between August 2019 and December 2020, BPGIC created over two hundred unsupported invoices addressed to BIA.

Creation of Additional False Invoices:

• To fill the gap in projected revenues, BPGIC created additional invoices addressed to BIA, issued monthly from August 2019 through at least December 2020. The amounts for these invoices typically ranged from $1.5 million to $2.5 million.

• BIA did not store any oil with BPGIC, and these invoices were, in fact, unpaid. To create the appearance of payment, BPGIC engaged in a series of circular transactions where BIA would write checks to BPGIC, and then BPGIC would write checks for similar amounts back to BIA.

The Third Set of Unsupported Invoices

Increased Demand for Storage Services:

• Towards the end of 2020, the demand for BPGIC’s oil storage services rose as a result of the coronavirus pandemic. This increase in demand led to the company's storage tanks being at or near full capacity, with market rates for storage reaching levels close to or above the previously fraudulent contractual amounts with Customer A and BIA.

Cessation of Dual Invoicing System:

• Due to the increased demand and higher market rates, Brooge stopped its practice of issuing dual invoices (one set of real invoices to actual customers and another set of inflated invoices to Customer A and BIA).

Creation of a Third Set of Unsupported Invoices:

• Despite the cessation of the dual invoicing system, Brooge, in May and June 2021, created another set of unsupported invoices. This action was taken to avoid a potential event of default on the Nordic bonds that the company had issued.

• The invoices created during this period were addressed to real customers but were never actually sent to them. These invoices included charges for ancillary services that were significantly higher than the actual usage rates by these customers.

Impact on Financial Reporting:

• As a result of these unsupported invoices, Brooge's reported revenues and EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) were artificially inflated for the six months ending June 30, 2021.

Misstatements to Auditors

Concealment of Inflated Revenues:

• The senior management of Brooge, along with others acting under their direction, hid the true nature of their inflated revenues from the company's external auditors.

• The auditors were provided with contracts and the false invoices related to Customer A and BIA. However, the auditors were not given access to contracts and invoices involving actual customers.

• Additionally, numerous false entries were made in the company's general ledger, which were then presented to the auditors.

Providing False Audit Evidence:

• BPGIC created and supplied fabricated evidence to E&Y and PwC as part of their invoice testing. This included the creation of fake emails and "customer order forms."

• These fabrications were designed to falsely show that Brooge had business interactions with Customer A or BIA. For example, when E&Y selected some invoices from Customer A and BIA for audit testing for the years 2018 and 2019, or when PwC requested support for ancillary service revenue from BIA during the 2020 audit, they were provided with these fabricated documents.

• The falsified materials given to PwC included charts supposedly indicating which vessels were delivering oil in Fujairah, UAE, on certain dates. In reality, these vessels were located in various parts of the world, far from Fujairah.

Misrepresentations in Official Communications:

• Nicolaas Lammert Paardenkooper, the CEO, signed management representation letters that contained false statements. These letters misrepresented the nature of the documentation provided to the auditors, claiming that all significant contracts, communications, and related information pertaining to customer arrangements were made available to them.

• Additionally, Paardenkooper signed confirmation letters that falsely attested to the accounts receivable balances from Customer A and BIA.

Fictitious Documents Provided to the SEC

Creation of Three Categories of False Documents:

• At the instruction of senior management, Brooge employees fabricated documents in three distinct categories, specifically for the purpose of misleading the SEC staff during their investigation.

First Category: Backdated False Invoices to BIA:

• These were false invoices addressed to BIA, but backdated to the period from February 2018 to July 2019.

• The purpose of these invoices was to ostensibly explain why BIA made payments for invoices initially issued to Customer A.

• Brooge's general ledger incorrectly recorded that these payments were made by Customer A, not BIA.

• These invoices, signed by Paardenkooper, were not based on any actual services rendered and did not exist until they were created in 2022, specifically for the SEC investigation.

Second Category: Backdated Commercial Storage Agreement:

• A fabricated Commercial Storage Agreement between BPGIC and BIA was created, backdated to January 22, 2018.

• This document was intended to provide false support for the invoices addressed to BIA that were actually created in 2022.

• This agreement was also a product of senior management's instructions.

Third Category: Backdated “Loan Agreement”:

• A fictitious "loan agreement" was backdated to July 17, 2017.

• This agreement was meant to justify other false entries in the general ledger related to the transactions.

Overstatement of Revenue Breakdown

Internal Investigation and Restatement of Financial Statements:

• Brooge's Audit Committee hired an external law firm and an accounting consultancy firm to conduct an internal investigation into the company's financial reporting.

• As a result of this investigation, Brooge restated its historical financial statements. The restated revenues for 2018, 2019, and 2020 were significantly lower than the revenues originally reported:

Internal Tracking of Actual Revenue Data:

• Internal spreadsheets at Brooge tracked the actual revenue data, which was found to be consistent with the restated figures.

• Additionally, it was noted that the third set of unsupported invoices had artificially inflated revenues by approximately $3.4 million in May and June 2021.

Impact on Financial Reporting:

• Due to these improper accounting practices, the financial statements included in several of Brooge’s filings with the SEC were materially overstated. This includes filings such as Form 20-F Annual Reports, Form 6-K Half-Year Reports, Form 6-K Press Releases, Form F-4 and Form 424B Proxy Materials, Form F-1 and Form F-3 Registration Statements, and Form 425 Investor Presentations.

• Nicolaas Lammert Paardenkooper, the CEO of Brooge, signed the majority of these SEC filings.

Commission's Consideration of Brooge's Actions:

• In deciding to accept Brooge's Offer (presumably a settlement offer or a similar form of resolution), the SEC considered the remedial actions taken by Brooge and the cooperation afforded to the SEC staff.

• Part of these remedial actions included providing information from the internal investigation conducted on behalf of the Audit Committee to the SEC staff.

Sanctions and Penalties

Cease and Desist Orders: Brooge, Paardenkooper, and Saheb are ordered to cease and desist from committing any future violations of specified sections of the Securities Act and the Exchange Act.

Prohibition of Executive Roles: Both Paardenkooper and Saheb are prohibited from acting as officers or directors of any issuer with securities registered under the Exchange Act.

Civil Money Penalties:

• Brooge must pay $5,000,000.

• Paardenkooper and Saheb each must pay $100,000.

Fair Fund Creation: A Fair Fund is established for the civil penalties, and the respondents are not allowed to claim offset or reduction of compensatory damages in related investor actions.

Payment Instructions: Specific instructions are provided for the payment of penalties.

Bankruptcy Provisions: For purposes of bankruptcy discharge exceptions, the findings in this order are true and admitted by Paardenkooper and Saheb, and any debt for penalties is considered a debt for violation of federal securities laws.