New Delhi:

The BJP today slammed Congress leader Rahul Gandhi for raising questions on the integrity of Indian stock markets based on the latest allegations by  US-based short seller Hindenburg.  

“The Leader of Opposition is now openly inciting and seeding doubt about the genuineness of the Indian stock markets. This blatant attempt to undermine confidence in our economy reveals the true intention of Rahul Gandhi, which is nothing but the destruction of India,” BJP leader Amit Malviya said in a post on X (formerly Twitter).  

He said that Mr Gandhi’s remarks come despite the expert committee appointed by the Supreme Court concluding there was no regulatory failure regarding the allegations of price manipulation made by Hindenburg.

“On Jan 3, 2024, the Supreme Court, led by CJI DY Chandrachud, observed that no willful or deliberate violations were done by SEBI,” Mr Malviya said.

Rahul Gandhi had alleged that there was significant risk in the Indian stock markets and that the “integrity” of the Securities and Exchange Board of India (SEBI) was “gravely compromised” by the allegations against its chairperson.

The new Hindenburg report claimed that SEBI Chairperson Madhabi Puri Buch and her husband Dhaval Buch had stakes in offshore entities involved in the alleged Adani money siphoning scandal.

The SEBI Chairman and the Adani Group, however, have labelled these allegations as “baseless” and “malicious”. Madhabi Puri Buch has also pointed out that the latest release by Hindenburg comes after SEBI took enforcement action and issued a show-cause notice to them in July.

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.

New Delhi:

Industrialists, political leaders and investors have crticised US short seller Hindenburg Research over its latest allegations targetting the chairperson of market regulator SEBI and Adani Group. The Group has denied any commercial relation with SEBI’s chairperson Madhabi Puri Buch.

A section of political leaders have also accused the Congress of being behind Hindenburg’s move.

“Congress is seeking foreign help to discredit, destabilise our financial markets and to create chaos in the country by attacking independent regulator SEBI and by casting aspersions on the chairman of SEBI,” said Union Minister Rajeev Chandrasekhar.

“The Congress has only one job — spreading anarchy in the country, confuse people and get them to focus on divisive issues,” agreed his cabinet colleague Jyotiraditya Scindia.

Economist Dr Jaijit Bhattacharya questioned the locus standi of Hindenburg. If they are a short-selling entity go ahead within the law, make your money”.

“What is the motivation for coming back and investing money for investigation? Is it an investigatino body? is it sanctioned by some authority? Or is it a journalistic body making suo motu investigations”,” he said.

“It is yellow journalism they are indulging in, because if you go line by line into what they are saying, each line seems to be a baseless allegation,” Mr Bhattacharya added.

Business leader Sandip Ghose said the entire episode appears a “huge conspiracy”. “It is not a question of SEBI stonewalling… If the irregularity was so large, would it not have come out in the Supreme Court inquiry?” he said.  

SEBI’s former Executive Director JN Gupta said the allegations would not affect the market. “When the allegations first came 15-20 months ago, the market took a hit… today Adani shares have recuperated and investors have recouped their losses,” he said.

“There being nothing new against the Adani group,” the US shortseller is targeting SEBI’s chairperson Madhabi Puri Buch, said senior advocate Mahesh Jethmalani. “They went to the Supreme Court, the Supreme Court dismissed it,” he added.

Senior advocate Mahesh Jethmalani has slammed US-based short-seller Hindenburg Research’s latest claims as “pathetic damp squib”. “The announcement prior to its alleged big revelation itself reveals its motive: to destabilise India’s stock markets. The pre-publicity ill behoves a reputed “research analyst”,” read his post on X, formerly Twitter. “There being nothing new against the Adani group,” the US shortseller is targeting SEBI’s chairperson Madhabi Puri Buch, Mr Jethmalani added.

#Hindenburg‘s “Something big” is a pathetic damp squib, The announcement prior to its alleged big revelation itself reveals its motive: to destabilise India’s stock markets. The pre publicity ill behoves a reputed “research analyst “. As regards the “big” something there is… https://t.co/QeKNO4gEFp

— Mahesh Jethmalani (@JethmalaniM) August 11, 2024

Hindenburg’s Saturday’s allegations has been slammed by the industry, the ruling BJP and others.

The Adani Group has termed the allegations “malicious, mischievous and manipulative” . The group said it has no commercial relationship with SEBI chairperson or her husband.

“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.

Last month, market regulator SEBI (Securities Exchange Board of India) had sent a show-cause notice to Hindenburg and its sole beneficial owner Nathan Anderson. The regulator had flagged violations by Hindenburg and Anderson under the SEBI Act, SEBI’s Prevention of Fraudulent and Unfair Trade Practices regulations, and SEBI’s Code of Conduct for Research Analyst regulations.

“SEBI had issued a notice to Hindenburg seeking information regarding the circumstances of the Adani short sale as it was entitled to. Instead of responding to these Hindenburg has chosen to attack its Chairperson on the ground of conflict of interest,” Mr Jethmalani said.

“The picture thus is one of a US based profiteer who made millions of dollars at the cost of Indian retail investors now hedging questions legitimately asked by the Indian regulator and brazenly defaming the latter without answering its questions. This reeks of colonial arrogance of days bygone,” his post read.

“It is time the govt of the day turned its serious attention to these anti nationals who have no other agenda but to  disrupt  India’s social fabric, distort its polity and now devastate its economy,” he added.

New Delhi:

The whole “crony capitalism” campaign against the Adani Group has backfired, and those who celebrated the Hindenburg Research “hit job” on the Adani Group “have egg on their faces”, senior lawyer Mahesh Jethmalani told NDTV.

Mr Jethmalani has also pointed to a possible Chinese hand in the short seller’s “hit job” on the Adani Group, and criticised the Congress party of inexplicably behaving “with such gusto” over the matter.

“This whole campaign [against Adani Group] has backfired. Initially, it did seem to have some political fallout; it certainly had a market fallout on Adani Group firms’ market cap, and retail investors took a big hit. Since then the Supreme Court clean chit has come, and Adani Group companies’ shares have returned to pre-Hindenburg levels,” Mr Jethmalani told NDTV.

“The only ones who have egg on their faces now are those who had taken this [Hindenburg row] up as a crony capitalism issue, and not for what it really was – a Chinese hit job on Adani Group, which was serving India’s strategic interests,” he said.

To a question on China’s alleged hand in the Hindenburg row, Mr Jethmalani, who’s also a Rajya Sabha MP from the BJP, said it would appear so [the Chinese Communist Party is targeting the Adani Group]. “The Supreme Court has given a clean chit on a complaint by a co-host of the Congress party, except for one or two matters which are pending. So this seemed to be a hit job by China,” he said.

Mr Jethmalani referred to Anla Cheng, a businesswoman who is under investigation in the US for allegedly subverting US interests and promoting China’s strategic interests.

“At that time I didn’t know about Anla Cheng. China is extremely upset about having lost three bits, to my knowledge, of overseas projects of strategic interests – a railway line in Australia; a port in Jaffna, and a port in Haifa, Israel. That was the most important one,” he said. “This hit job was in close proximity to the losing of these contracts. Why the Congress party has gotten into it with such gusto, only they can explain it,” the senior lawyer told NDTV.

He said new facts have come to light after Hindenburg’s response to a notice by the capital markets regulator Securities and Exchange Board of India (SEBI) became public. Hindenburg has said it was only a researcher that was given a contract by a company owned by US-based fund manager Mark E Kingdon.

A trust fund in which Mr Kingdon and his Chinese-origin wife, Anla Cheng, held 36 per cent was used in the hit job against Adani Group companies, Mr Jethmalani said.

“At the same time they also entered into an agreement with a Kotak investment outfit, which set up a special purpose vehicle KIOS (Kotak India Opportunity Fund). This was meant for starting a trading account for the couple’s company… They did not wait for the [Hindenburg] report to come out before they took certain steps. So the trading account was started; money [from the family fund] was given by them,” Mr Jethmalani said.

“Prima facie, a bulk of the money earned out of this – $25 million – went to the Kingdons. That doesn’t seem to be the entire figure. More study is needed. SEBI may need to put more questions to Hindenburg. We don’t know the entire size of the cake, but a portion of it was to go to Hindenburg. So, Hindenburg was the researcher, and the entire trading op was the couple’s fund,” he said.

On Kotak’s role, Mr Jethmalani said the Indian bank certainly knew this was a short sell, bear-hammering transaction.

“Before the report was even made public, they had already taken short positions in Adani shares. Kotak certainly knew this was going to be a short sell trade in Adani shares. They covered the short sell after putting the margin money up, after the report was issued and shares fell. So that’s how short sellers, bear-hammers make their money,” Mr Jethmalani told NDTV.

“Hindenburg seems to be taking an arm’s length position on the couple and their fund. Whoever among them approached Kotak Mahindra Investments Limited [KIOS was the special purpose vehicle], what we do know is that Kotak was the one who knew who were involved. Hindenburg seems to have said ‘we’re only the researcher for [studying] Adani companies and we were supposed to get a cut’. So they also knew it was a short sell operation. But only Kotak knew who the investors were,” the senior lawyer said.

He said the Chinese-American businesswoman Anla Cheng is an extremely controversial person even in the United States. She ran SupChina [later renamed to The China Project], which was pro-China and promoted Chinese interests.

“An insider – this is where one got all the information from – Shannon Van Sant, ex employee of Cheng’s company, in her sworn statement said Cheng was subverting US interests and promoting China’s strategic interests. She found the entire operation to be extremely fishy, a hub of Chinese spies,” Mr Jethmalani said.

After the US Congress took up the matter, SupChina morphed into another company called ‘The China Project’, he said, adding because of the heat it faced from the US legislature for a thorough investigation into all its operations, The China Project announced publicly they are shutting it down.

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.

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

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.

Senior Congress leader Jairam Ramesh. File
| Photo Credit: The Hindu

The Congress on September 14 alleged that the “Adani scam” has exposed the role tax havens play in hiding large-scale violation of Indian laws and said the issue should have been discussed at the recent G20 Summit.

It also said that if a Joint Parliamentary Committee (JPC) probe is ordered into the allegations against the Adani Group, it will have to make sure that any loopholes for round-tripping and money-laundering are effectively shut.

In a post on X, Congress general secretary Jairam Ramesh said the rise in Indian outward direct investment in the past 25 years has been a sign of deepening globalisation.

“However, it is disturbing that offshore tax havens such as Bermuda, Jersey and Cyprus rank among the top 10 destinations for Indian investment, according to the RBI,” he said.

“This is in addition to Mauritius that has long been suspected as a preferred destination for Indian money-laundering and round-tripping,” the Congress leader noted.

“The Adani MegaScam has exposed the critical role such tax havens play in hiding the large-scale violation of Indian laws and regulations. These violations are hollowing out our economy and affecting the credibility of our stock markets,” Mr. Ramesh said.

“The G20 was the right forum to take up this issue and ensure concrete action against tax havens. But the Prime Minister was busy projecting his own image rather than protecting India’s interests,” he claimed.

“A JPC into the Adani MegaScam will have to make sure that any remaining loopholes for round-tripping and money-laundering are effectively shut,” the Congress leader said.

The Congress and other Opposition parties have been demanding a JPC probe into the Adani issue and will take up the issue during the upcoming special session of Parliament from September 18 to 22.

U.S. short-seller Hindenburg Research, in a report released on January 24, alleged accounting fraud, stock price manipulation and use of tax havens by the Adani Group, triggering a stock market rout. The Adani Group has denied all allegations by Hindenburg.