New Delhi:

In a stunning claim that he has called a “smoking gun”, senior lawyer Mahesh Jethmalani has alleged that a businessman with Chinese links had commissioned the report by short-seller Hindenburg Research which led to shares of Adani Group companies taking a hit.

Earlier this week, the Securities and Exchange Board of India (SEBI) had said that foreign portfolio investor Kingdon Capital Management LLC and its entities aided Hindenburg in indirectly participating in Adani Enterprises Ltd. An investigation by the markets regulator also exposed that Kotak Mahindra and Hindenburg conspired together to take short positions in Adani shares.

In a lengthy post on X, Mr Jethmalani said Mark Kingdon, the American businessman behind Kingdon Capital Management LLC, had hired Hindenburg to prepare a report on the Adani Group. Mr Kingdon also approached Kotak’s international investment arm Kotak Mahindra Investments Limited (KMIL) to set up an offshore fund as well as offshore accounts to trade in Adani shares. This led to the creation of the Kotak India Opportunity Fund (KIOF). 

This fund allegedly took short positions in shares of Adani Group Companies through the Mauritius route before the Hindenburg report was made public and nearly $ 40 million for this was given by the Kingdon Master Fund. 

The smoking gun referred to by the senior lawyer was his revelation that Mr Kingdon’s wife Anla Cheng, a Chinese-American who has a large shareholding in the Kingdon Master Fund, is a lobbyist for Chinese interests in the United States. 

“She was the CEO of #SupChina a pro-China media corporate initiative which morphed into an entity called The China Project after a whistleblower accused SupChina of news subversion in China’s interest in a sworn statement before the US Congress,” the lawyer wrote. 

“#TheChinaProject shut down after calls for an investigation into its subversive activities by some US senators including having links with the Chinese Communist Party. The latter clearly has a bone to pick with the Adani group,” he added.

Mr Jethmalani suggested that the actions of Ms Cheng and Mr Kingdon were prompted by the Adani Group thwarting Chinese interests in several parts of the globe, including outbidding Chinese players for the Haifa Port in Israel and for coal projects near Sri Lanka’s Jaffna. 

Key Questions

Having laid out his points, Mr Jethmalani posed three major questions. 

“Who introduced the Kingdons to KMIL, what due diligence was conducted by KMIL regarding the Kingdons and did it participate in the short sell as a principal,” he asked.

The second question was whether all the Indian people, organisations and entities who helped Hindenburg knew about the short-selling plan and whether they benefited from it. Mr Jethmalani specifically mentioned politicians, in an apparent dig at the opposition, which has used the Adani-Hindenburg issue to target the group and the government on several occasions.

The lawyer also asked whether these people and entities knew about the Chinese link. 

‘Misrepresentations’

SEBI, in its show cause notice to Hindenburg Research LLC said the organisation’s report contained misrepresentations and inaccurate statements which built a convenient narrative through selective disclosures and catchy headlines to cause panic in Adani share prices, thereby deflating the prices of the Adani group stocks. 

Hindenburg has claimed that it did not provide research notice to Kingdon before sharing the draft report and Kingdon did not share the trading notice with Hindenburg before the report was shared publicly through mass email.

A Kotak Mahindra International Ltd spokesperson in a statement said KMIL and KIOF “unequivocally state that Hindenburg has never been a client of the firm nor has it ever been an investor in the Fund. The Fund was never aware that Hindenburg was a partner of any of its investors.”

“KMIL has also received a confirmation and declaration from the Fund’s investor that its investments were made as a principal and not on behalf of any other person,” the spokesperson stated.

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