In the wake of the latest allegations made by US short-seller Hindenburg Research, legal expert and Senior Advocate Harish Salve has warned that giving credence to organisations like that will lead to them questioning India’s judiciary one day.

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In the Centre’s first reaction to the latest report released by Hindenburg Research, Union Minister Kiren Rijiju has said that the Congress and some of its allies want to destroy the country. The principal opposition party and others, he said, could not win the elections and are now aligning with anti-India forces.

On Saturday, Hindenburg Research, which is a US-based short-seller, released a report claiming that Securities Exchange Board of India (SEBI) chairperson Madhabi Puri Buch and her husband, Dhaval, had a stake in offshore entities used in alleged financial wrongdoing by the Adani Group.

When he was asked about the report and the allegations made by the Congress, Mr Rijiju said on Monday, “We have to understand that there are many forces, both inside and outside the country, who are against India and work against it. We have to recognise them. The people who are playing games to hurt India’s ascent as an economic power… I feel that the Congress and some of its allies want to destroy the country. They could not defeat Prime Minister Narendra Modi because the country is standing with him.”

“Elections have taken place and a new government has been formed under PM Modi. They could not win the elections and they are working with anti-India forces to ensure that India suffers a loss. They will never be successful because the people of India have realised who the anti-India forces are,” Mr Rijiju, who holds the Minority Affairs and Parliamentary Affairs portfolios, added. 

Earlier on Monday, BJP leader Ravi Shankar Prasad took a similar stance and said the Congress is involved in creating economic instability and anarchy against India.

“After losing (the Lok Sabha elections) for a third time, the Congress and its closest ‘toolkit’ allies now want to make the Indian economy unstable. Congress today has developed hatred against India. What Congress wants is to bring back ‘control Raj'” Mr Prasad said.

The BJP leader also stressed that India is a safe, stable and promising market. 

‘Character Assassination’

Madhabi and Dhaval Buch have accused Hindenburg Research of attempting a character assassination of the SEBI chairperson.

“Hindenburg has been served a show cause notice for a variety of violations in India. It is unfortunate that instead of replying to the show cause notice, they have chosen to attack the credibility of SEBI and attempt character assassination of the SEBI Chairperson,” the couple said in a statement. 

The Adani Group has also said Hindenburg Research has made “recycled claims”.

“For a discredited short-seller under the scanner for several violations of Indian securities laws, Hindenburg’s allegations are no more than red herrings thrown by a desperate entity with total contempt for Indian laws,” the group said in an exchange filing.

(Disclaimer: New Delhi Television is a subsidiary of AMG Media Networks Limited, an Adani Group Company.)

Photo used for representation purpose only.

Indian REITs Association on Monday (August 12, 2024) said that claims made by the US-based short seller Hindenburg Research suggesting that the REIT framework made by markets regulator SEBI serves the interests of a select few are “baseless and misleading”.

In fact, the association has commended SEBI and its leadership for crafting a “rigorous regulatory environment” that includes comprehensive periodic reporting requirements, mandatory independent valuations, and strict governance standards.

These measures are designed to enhance transparency and protect investor interests, it added.

The statement came after the Hindenburg report on Saturday (August 10, 2024) alleged that recent amendments to SEBI’s REIT Regulations 2014 were made to benefit a specific multinational financial conglomerate. In this regard, the markets regulator stated that SEBI (REIT) Regulations, 2014 has been amended from time to time.

In a statement, the association said that since the introduction of REIT (Real Estate Investment Trust) regulations in 2014, India has established a strong and transparent regulatory framework that aligns with global best practices.

“Developed in consultation with all market participants, this framework ensures the highest levels of investor protection for both –domestic and international institutional investors, as well as retail investors,” it said.

Hindenburg Research on Saturday (August 10, 2024) launched a broadside against market regulator Sebi chairperson Madhabi Puri Buch, alleging she and her husband had stakes in obscure offshore funds used in the alleged Adani money siphoning scandal.

Sebi chairperson Buch and her husband Dhaval denied the allegations as baseless and asserted their finances are an open book. Her husband Dhaval Buch is a senior advisor with Blackstone.

The Adani Group termed the latest allegations malicious and based on manipulation of select public information.

The company said it has no commercial relationship with the Sebi chairperson or her husband.

Indian REITs Association, which counts Brookfield India Real Estate Trust, Embassy Office Parks REIT, Mindspace Business Parks REIT, and Nexus Select Trust — as their founding members, said that the sector’s growth has drawn significant interest and participation from prominent global institutional investors.

These investors’ participation not only strengthens the trust and credibility of India’s financial system but also provides investors with a dependable and transparent avenue to engage in the country’s expanding real estate market.

Currently, there are four listed REITs on the Indian stock exchanges, collectively managing assets worth over ₹1.4 lakh crore and serving over 2.4 lakh crore unitholders. These REITs have distributed over ₹18,000 crore, with the market capitalisation of the asset class reaching about ₹80,000 crore.

Madhabi Puri Buch, chairperson of the Securities and Exchange Board of India (SEBI). File
| Photo Credit: PTI

Hours after the stock market regulator’s chairperson Madhabi Puri Buch, and her spouse Dhaval Buch, issued a clarification on a Hindenburg Research report red-flagging their investments in obscure offshore funds linked to the Adani group, and ownership of consulting firms, the U.S.-based short seller said their rebuttal contains important ‘admissions’, raises fresh questions and confirms a ‘massive conflict of interest’.

“Buch’s response now publicly confirms her investment in an obscure Bermuda/Mauritius fund structure, alongside money allegedly siphoned by Vinod Adani. She also confirmed the fund was run by a childhood friend of her husband, who at the time was an Adani director. SEBI [Securities Exchange Board of India] was tasked with investigating investment funds relating to the Adani matter, which would include funds Ms. Buch was personally invested in and funds by the same sponsor which were specifically highlighted in our original report,” the firm said, stressing this was “obviously a massive conflict of interest”.

On the two consulting firms, Singapore-registered Agora Partners and India-based Agora Advisory, that Ms. Buch had set up before joining SEBI and were referred to in Hindenburg’s report, the SEBI chief and her spouse said these firms “became immediately dormant on her appointment with SEBI” and were used by her husband after he retired in 2019 for his own “consultancy practice”. The statement from Mr. Buch and Ms. Buch also said her shareholding in the Singapore entity had been transferred to him.

Hindenburg countered that Ms. Buch remained a 100% shareholder of Agora Partners Singapore until March 16, 2022, as per Singaporean records, owning it during her entire time as a Whole Time Member of SEBI. “She only transferred her shares into her husband’s name two weeks after her appointment as SEBI Chairperson,” the firm pointed out, adding that it is “impossible to see how much money this entity has earned during her time at SEBI” as it doesn’t publicly report its financials.

Also Read | Adani case: Supreme Court had said it can transfer probe if bias found

However, Ms. Buch continued to hold 99% of the shareholding in the India-based consulting firm as of March 31, 2024. Noting that the Indian entity is “currently active”, Hindenburg said it has “generated ₹23.985 million (~$312,000) in revenue during the financial years (‘22, ‘23, and ‘24), while she was serving as Chairperson, per its financial statements”.

On Ms. Buch’s remarks that her husband used the consulting entities since 2019 to transact with unnamed “prominent clients in the Indian industry”, Hindenburg asked if these included clients SEBI is tasked with regulating.

“This is especially important given whistleblower documents showing that Buch used her personal email to do business using her husband’s name while serving as a Whole Time Member of SEBI. In 2017, weeks ahead of her appointment as SEBI Whole Time Member, she ensured the accounts with ties to Adani “be registered solely in the name of Dhaval Buch”, her husband, per whistleblower documents,” it said in a response posted on X.

“Despite disclaiming control, a private email she sent a year into her SEBI term shows she redeemed stakes in the funds through her husband’s name, per the whistleblower documents. This raises the question: What other investments or business has the SEBI Chairperson engaged in through her husband’s name while serving in an official capacity?”, Hindenburg Research asked.

With the joint statement from the SEBI chief and her spouse promising a “commitment to complete transparency”, Hindenburg asked if she will “publicly release the full list of consulting clients and details of the engagements, both through the offshore Singaporean consulting firm, the Indian consulting firm and any other entity she or her husband may have an interest in”. “Finally, will the SEBI Chairperson commit to a full, transparent and public investigation into these issues?”, it concluded.

SEBI chief Madhabi Puri Buch at SEBI Bhavan in Mumbai.
| Photo Credit: PTI

In its first comments following a new report by U.S.-based short seller Hindenburg Research, capital markets regulator SEBI on Sunday (August 11, 2024) said it has investigated all the allegations against the Adani group.

Chairperson Madhabi Buch made relevant disclosures from time to time and recused herself in matters involving potential conflicts of interest, the regulator said in a statement.

The regulator also said that it has duly investigated the allegations made by Hindenburg against Adani, and said that last of its 26 investigations is nearing completion now.

Earlier, Ms. Buch and her husband Dhaval Buch had termed the allegations baseless, and also said that the short-seller is attacking the credibility of the capital markets regulator, and also attempting a character assassination of the chairperson.

Hindenburg Research alleged that it suspects SEBI’s unwillingness to act against Adani group may be because Ms. Madhabi Buch had stakes in offshore funds linked to the conglomerate.

In this file photo, SEBI Chairperson Madhabi Puri Buch speaks during CII’s 17th Corporate Governance Summit, in Mumbai.
| Photo Credit: PTI

U.S.-based short-seller Hindenburg Research is attacking capital markets regulator SEBI’s credibility and attempting a character assassination of its chief, Madhabi Puri Buch and her husband Dhaval said on Sunday (August 11, 2024).

In a detailed statement issued this evening, the Buchs clarified on the raft of allegations made by Hindenburg in a report on Saturday (August 10, 2024).

“They have chosen to attack the credibility of Sebi and attempt character assassination of the Sebi chairperson,” the statement said.

Hindenburg had alleged that it suspects SEBI’s unwillingness to act against Adani Group may be because Ms. Madhabi had stakes in offshore funds linked to the conglomerate. The Buchs had immediately termed the allegations “baseless” in an early morning statement.

While Ms. Madhabi serves as the chairperson of SEBI, her husband is a senior advisor with Blackstone.

In the fresh statement, the Buchs said their investment in a fund promoted by IIFL Wealth Management was as Singapore-based private citizens, and made two years before Ms. Madhabi joined SEBI as a whole-time member in 2017.

According to the statement, Buchs decided to invest in the two funds on advice of Mr. Dhaval’s childhood friend, Anil Ahuja.

Mr. Ahuja is the person who the Hindenburg report has identified as the founder and Chief Investment Officer of Mauritius-based IPE Plus Fund and who the Adani Group also in its statement said was a nominee of 3i Investment Fund in Adani power (2007-2008) and served as a director of Adani Enterprises for three terms spanning nine years ended June 2017.

Citing Mr. Ahuja’s statement, the Buchs said that at no point did the fund invest in any bond, equity, or derivative of any Adani Group company.

On the Hindenburg report’s concerns surrounding Mr. Dhaval’s association with Blackstone, the Buch couple said the appointment was on account of his deep expertise in supply chain management and predates Ms. Madhabi’s elevation of becoming the SEBI chairperson.

“At no time has Dhaval been associated with the real estate side of Blackstone,” they added.

They also clarified that immediately on Mr. Dhaval’s appointment, the Blackstone Group was added to Ms. Madhabi’s “recusal list” maintained with SEBI.

Making it clear that all the regulations in SEBI are approved by its board and not by the chairperson, the statement said insinuations of a handful of the decisions concerning the Real Estate Investments Trusts industry are favours to specific party are “malicious and motivated”.

They said in the last two years, SEBI has issued over 300 circulars across the entire market ecosystem and these include ease of doing business initiatives.

On Ms. Madhabi’s two consulting firms, the couple said the entities became “dormant” on her appointment at SEBI and added that her shareholding in them was also disclosed to SEBI.

However, it also added that on Mr. Dhaval’s retirement from Unilever, he started a consultancy practice through the same companies and worked for prominent clients in India.

Linking the earnings in the consultancy companies to Ms. Madhabi’s current government salary is “malicious”, the statement said.

In the report, Hindenburg alleges that Ms. Madhabi “currently” has a 99% ownership in Indian consulting business called Agora Advisory where her husband is a director.

“When the shareholding of the Singapore entity moved to Dhaval, this was once again disclosed, not just to Sebi, but also to the Singapore authorities and the Indian tax authorities,” it said adding that SEBI has strong institutional mechanisms on disclosure and recusal norms.

The statement reminded all that Hindenburg has been served a show cause notice for violations in India, and called it “unfortunate” that instead of replying to it, the entity has chosen to attack SEBI’s credibility and is an attempt of character assassination of its chief, the statement by Buchs said.

SEBI chairperson Madhabi Puri Buch. Photo: sebi.gov.in

U.S. short-seller Hindenburg Research launched a fresh broadside against market regulator Sebi chairperson Madhabi Puri Buch, alleging she and her husband had stakes in obscure offshore funds used in the ‘Adani money siphoning scandal’.

In a blogpost, Hindenburg said 18 months since its damning report on Adani, “SEBI has shown a surprising lack of interest in Adani’s alleged undisclosed web of Mauritius and offshore shell entities.” Citing “whistleblower documents”, it said, “Madhabi Buch, the current chairperson of SEBI, and her husband had stakes in both obscure offshore funds used in the Adani money siphoning scandal.” Obscure offshore Bermuda and Mauritius funds, allegedly controlled by Vinod Adani — elder brother of group chairman Gautam Adani — are alleged to have been used to round-trip funds and inflate stock price.

Hindenburg said, “A declaration of funds, signed by a principal at IIFL states that the source of the investment is ‘salary’ and the couple’s net worth is estimated at $10 million..

No immediate comments were available from Sebi.

In January 2023, Hindenburg Research, which in the past has shorted, or bet against, companies like electric truck maker Nikola Corp and Twitter (now X), accused Adani Group of pulling “the largest con in corporate history” by using a web of companies in tax havens to inflate its revenue and manipulate stock prices, even as debt piled up.

Though the conglomerate vehemently denied all allegations, the damning report sent the group’s shares into a free fall, wiping out over $150 billion in market value of the 10 listed entities at their lowest point.

Most of the 10 listed companies have since recouped the losses.

After the Hindenburg report, the Supreme Court asked Sebi to complete its investigation and set up a separate expert panel to look into regulatory lapses. The panel did not give any adverse report on Adani and the apex court too stated that no other probe other than the one being done by Sebi was required.

Sebi (Securities and Exchange Board of India), which had been investigating the Adani group even before Hindenburg report, told a Supreme Court-appointed panel in 2023 that it was investigating 13 opaque offshore entities that held between 14% and 20% across five publicly traded stocks of the conglomerate. It hasn’t stated if the two incomplete probes have since been completed.

“The current SEBI Chairperson and her husband, Dhaval Buch, had hidden stakes in the exact same obscure offshore Bermuda and Mauritius funds, found in the same complex nested structure, used by Vinod Adani,” Hindenburg said.

It said, on March 22, 2017, just weeks ahead of his wife being appointed SEBI chairperson, Dhaval Buch wrote to Mauritius fund administrator Trident Trust, according to documents we received from a whistleblower. The email was regarding his and his wife’s investment in the Global Dynamic Opportunities Fund (GDOF).

“In the letter, Dhaval Buch requested to ‘be the sole person authorised to operate the Accounts’, seemingly moving the assets out of his wife’s name ahead of the politically sensitive appointment,” it alleged.

“In a later account statement dated February 26th, 2018, addressed to Madhabi Buch’s private email, the full details of the structure are revealed: “GDOF Cell 90 (IPEplus Fund 1)“. Again, this is the exact same Mauritius-registered “cell” of the fund, found several layers deep in a convoluted structure, reportedly used by Vinod Adani,” it alleged.

U.S. short-seller Hindenburg Research had shared an advance copy of its damning report against the Adani Group with New York-based hedge fund manager Mark Kingdon about two months before publishing it and profited from a deal to share spoils from share price movement, according to market regulator SEBI.

The Securities and Exchange Board of India (SEBI), in its 46-page show-cause notice to Hindenburg, detailed how the U.S. short seller, the New York hedge fund and a broker tied to Kotak Mahindra Bank benefited from the over ₹150 billion routs in the market value of Adani Group’s 10 listed firms post-publication of the report.

The SEBI charged Hindenburg with making “unfair” profits from “collusion” to use “non-public” and “misleading” information and induce “panic selling” in Adani Group stocks.

Hindenburg, which made public the SEBI notice, in its response, has described the show-cause as an attempt to “silence and intimidate those who expose corruption and fraud perpetrated by the most powerful individuals in India” and revealed that the vehicle used to bet against Adani’s flagship firm Adani Enterprises Ltd belonged to Kotak Mahindra (International) Ltd, a Mauritius-based subsidiary of Kotak Mahindra Bank Ltd. (KMIL).

KMIL’s fund placed bets on Adani Enterprises Ltd for its client Kingdon’s Kingdon Capital Management.

The SEBI notice includes extracts of time-stamped chats between an employee of the hedge fund and KMIL traders for selling future contracts in AEL.

Kotak Mahindra Bank has stated that Kingdon “never disclosed that they had any relationship with Hindenburg nor that they were acting on the basis of any price-sensitive information”.

SEBI — which last year told a Supreme Court-appointed panel that it was investigating 13 opaque offshore entities that held between 14% and 20% across five publicly traded stocks of the Adani Group — has sent notices not just to Hindenburg but also to KMIL, Kingdon and Hindenburg founder Nathan Anderson.

Lawyer’s claim

Senior lawyer Mahesh Jethmalani, who had in the past spoken for the Adani Group, in a post on X claimed that Kingdon had a Chinese link. Kingdon is married to “Chinese spy” Anla Cheng, he claimed.

“Accomplished Chinese spy Anla Cheng, who along with her husband Mark Kingdon, hired Hindenburg for a research report on Adani, engaged the services of Kotak to facilitate a trading account to short sell Adani shares; made millions of dollars from their short selling; eroded Adani market cap enormously,” he alleged.

Kingdon, which had a controlling stake in KMIL’s K-India Opportunities Fund Ltd, had a pact to share with Hindenburg 30% of profit made from trading in securities based on the report, the SEBI letter said, adding this profit share was cut to 25% due to the extra time and effort needed to reroute trades via the K India fund.

The market regulator said Kingdon transferred ₹43 million in two tranches to build short positions in AEL. The K India fund built short positions for 8,50,000 shares ahead of the report release and squared off these positions soon after the report was released.

According to SEBI, Hindenburg published a report titled ‘Adani Group: How the World’s 3rd Richest Man is Pulling The Largest Con in Corporate History’ on January 24, 2023 (United States time – January 25, 2023, according to IST) during pre-market hours.

Fall in price

“Prior to the release of the Hindenburg Report, concentration in short-selling activity was observed in the derivatives of Adani Enterprises Ltd,” it said. “Pursuant to the release of the said report, the price of AEL fell by around 59% during the period from January 24, 2023 to February 22, 2023” — from ₹3,422 to ₹14,04.85 per share.

SEBI said K India Opportunities Fund Ltd – Class F (KIOF Class F) opened a trading account and started trading in the scrip of AEL just a few days prior to the publication of the report and then squared off its entire short position post-publication of the Hindenburg Report, making significant profits of ₹183.23 crore (₹22.25 million).

“The net profit after trading and legal expenses comes to ₹22.11 million,” SEBI said.

As part of the deal, Kingdon owed Hindenburg ₹5.5 million, of which ₹4.1 million had been paid as of June 1, the notice said.

In its response to SEBI, Kingdon Capital said it had got legal option that it could “enter into a research services agreement with a third-party firm that publicly releases short reports on companies, pursuant to which Kingdon Capital would be given a draft copy of the report before it is made publicly available and would have the opportunity to accordingly made investments before the report’s public dissemination”.

A show-cause notice is often a precursor to formal legal action that may include imposing financial penalties and barring participation in the Indian capital market. SEBI can also seek government help to geoblock the research firm’s website.

21 days’ time

SEBI has given Hindenburg 21 days to respond to its allegations.

Hindenburg, which published the SEBI notice on its website, in its response stated that it made just ₹4.1 million from its declared positions on Adani stocks and criticised the regulator for not focusing its investigation into the January 2023 report “providing evidence” of the conglomerate creating “a vast network of offshore shell entities” and moving billions of dollars “surreptitiously” into and out of Adani public and private entities.

It said that while SEBI was seeking to claim jurisdiction over a U.S.-based investor, the regulator’s notice “conspicuously failed to name the party that has an actual tie to India: Kotak Bank,” which created and oversaw the offshore fund structure used by Hindenburg’s investor partner to bet against Adani.

The regulator “masked the “Kotak” name with the acronym “KMIL”, it added.

KMIL refers to Kotak Mahindra Investments Ltd, the asset management company.

File picture
| Photo Credit: Reuters

Kotak Mahindra International Limited said on Tuesday that U.S. short-seller Hindenburg Research has never been an investor in the K-India Opportunities Fund.

Kotak was responding to allegations that Hindenburg colluded with its client Kingdon Capital Management and used a Kotak group offshore fund to short Adani group shares last year.

“The Fund was never aware that Hindenburg was a partner of any of its investors,” Kotak said in a media statement.

It added that investments were made in the fund by its investors and not on behalf of any other person.

Kotak further said that it is cooperating with India markets regulator.

Jairam Ramesh. File
| Photo Credit: ANI

The Congress on October 19 urged the Securities and Exchange Board of India (SEBI) to stand firm and finish its investigation into the Adani matter in a timely manner, even as it reiterated that only a JPC probe can investigate the full scope of the issue.

In a post on X, Congress general secretary Jairam Ramesh cited a media report which claimed that the SEBI has asked the Organized Crime and Corruption Reporting Project (OCCRP) to give it access to key documents about the allegations of stock manipulation and accounting fraud against the Adani Group.

“Recently, the Organised Crime & Corruption Reporting Project (OCCRP) found clinching evidence that Adani associates were controlling opaque shell companies in overseas tax havens that had amassed huge stakes in Adani Group companies. All this was done in blatant violation of SEBI regulations,” Mr. Ramesh said. “Major global papers such as the Financial Times and the Guardian covered the story in detail,” he pointed out.

“The Adani Group and its minions in the BJP attempted to discredit OCCRP as ‘Soros-funded interests’. Now, it emerges that SEBI itself had approached OCCRP to get access to the documents proving that Adani was in fact indulging in round-tripping and money-laundering benami funds,” Mr. Ramesh said. “Will Adani apologists attack SEBI as conspiring with Soros? Does this not prove that SEBI is finally taking these disclosures seriously and attempting to fulfill its duty to the nation,” he said.

“We urge SEBI to stand firm and finish its investigation in a timely manner. However, we reiterate that only a JPC can investigate the full scope of the Adani MegaScam, including the close and enduring relationship, financial or otherwise, between the PM and his friend Adani,” Mr. Ramesh said.

The Opposition party has been questioning the financial dealings of billionaire Gautam Adani’s Group after the U.S. research firm Hindenburg alleged “irregularities” and charged it with stock price manipulation.

The Adani Group has denied all the allegations made in the Hindenburg report and claimed there had been no wrongdoing on its part.