- Sunday, December 22, 2024
The short-seller said the capital markets regulator has shown “surprising lack of interest in Adani’s alleged undisclosed web of Mauritius and offshore shell entities”
By: Shajil Kumar
US 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”.
“In brief, despite the existence of thousands of mainstream, reputable onshore Indian mutual fund products, an industry she now is responsible for regulating, documents show SEBI Chairperson Madhabi Buch and her husband had stakes in a multi-layered offshore fund structure with miniscule assets, traversing known high-risk jurisdictions, overseen by a company with reported ties to the Wirecard scandal, in the same entity run by an Adani director and significantly used by Vinod Adani in the alleged Adani cash siphoning scandal,” it alleged.
It went on to cite the Supreme Court order where it was recorded that Sebi had “drawn a blank” in its investigations into who funded Adani’s offshore shareholders.
“If SEBI really wanted to find the offshore fund holders, perhaps the SEBI chairperson could have started by looking in the mirror,” it said. “We find it unsurprising that SEBI was reluctant to follow a trail that may have led to its own chairperson.”
No immediate comments were available from Sebi.
In January last year, 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 USD 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 market regulator 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, last year had told a Supreme Court-appointed panel that it was investigating 13 opaque offshore entities that held between 14 per cent and 20 per cent 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 22nd, 2017, just weeks ahead of her 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.
According to Hindenburg, Madhabi Buch and her husband had undisclosed investments in obscure offshore funds in Bermuda and Mauritius, the same entities allegedly used by Vinod Adani. These investments reportedly date back to 2015, well before Madhabi Buch’s appointment as a whole-time member of SEBI in 2017 and her elevation to SEBI chairperson in March 2022.
Buch and her husband may have first opened their account with IPE Plus Fund 1 on June 5, 2015 in Singapore. IPE fund is a small offshore Mauritius fund set up by an Adani director through India Infoline (IIFL), a wealth management firm with ties to the Wirecard embezzlement scandal.
“Vinod Adani, brother of Gautam Adani, used this structure to invest in Indian markets with funds allegedly siphoned from over-invoicing of power equipment to Adani Group,” claimed Hindenburg.
Sebi chief, husband deny allegations
Madhabi Puri Buch and her husband have denied allegations levelled against them by Hindenburg as baseless and asserted that their finances are an open book.
In a statement on Saturday (10), they also said it is unfortunate that Hindenburg Research against whom Sebi has taken an Enforcement action and issued a show cause notice has chosen to attempt character assassination in response to the same.
Responding to the allegation, Buchs said, “In the context of allegations made in the Hindenburg Report dated August 10, 2024 against us, we would like to state that we strongly deny the baseless allegations and insinuations made in the report.”
“The same are devoid of any truth. Our life and finances are an open book. All disclosures as required have already been furnished to SEBI over the years,” the statment said.
Buchs further said they have no hesitation in disclosing any and all financial documents, including those that relate to the period when we were strictly private citizens, to any and every authority that may seek them.
“Further, in the interest of complete transparency, we would be issuing a detailed statement in due course,” the added,
Malicious allegation: Adani group
Adani Group on Sunday termed US short-seller Hindenburg Research’s latest allegations as malicious and manipulative of select public information, saying it has no commercial relationship with SEBI chairperson or her husband.
“The latest allegations by Hindenburg are malicious, mischievous and manipulative selections of publicly available information to arrive at pre-determined conclusions for personal profiteering with wanton disregard for facts and the law.
“We completely reject these allegations against the Adani Group which are a recycling of discredited claims that have been thoroughly investigated, proven to be baseless and already dismissed by the Hon’ble Supreme Court in January 2024,” the group said in a filing.
Responding to the allegations, the Adani filing said: “It is reiterated that our overseas holding structure is fully transparent, with all relevant details disclosed regularly in numerous public documents.”
It went on to state that Anil Ahuja was a nominee director of 3i investment fund in Adani Power (2007-2008) and, later, a director of Adani Enterprises until 2017.
“The Adani Group has absolutely no commercial relationship with the individuals or matters mentioned in this calculated deliberate effort to malign our standing. We remain steadfastly committed to transparency and compliance with all legal and regulatory requirements,” it said.
Adani said 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.”
Congress demands JPC probe
In the wake of the US short-seller Hindenburg Research’s allegations against SEBI chairperson Madhabi Buch, the Congress on Sunday said the government must act immediately to eliminate all conflicts of interest in the regulator’s investigation of the Adani Group and reiterated its demand for a joint parliamentary committee probe into the matter.
The opposition party also said the “seeming complicity of the highest officials of the land” can only be resolved by setting up a Joint Parliamentary Committee to investigate the full scope of the “scam”.
In a statement issued late Saturday night and reposted on Sunday, Congress general secretary in-charge communications Jairam Ramesh said the SEBI’s “strange reluctance to investigate the Adani mega scam” has been long noted, not least by the Supreme Court’s Expert Committee.
The Committee, he said, had noted that SEBI in 2018 diluted and in 2019, entirely deleted the reporting requirements relating to the ultimate beneficial (i.e. actual) ownership of foreign funds.
“This had tied its hands to the extent that ‘the securities market regulator suspects wrongdoing, but also finds compliance with various stipulations in attendant regulations… It is this dichotomy that has led to SEBI drawing a blank worldwide’,” Ramesh said quoting the Expert Committee.
“Under public pressure, after the Adani horse had bolted, SEBI’s board reintroduced stricter reporting rules on 28 June, 2023. It told the Expert Committee on 25 August, 2023 that it was investigating 13 suspicious transactions. Yet the investigations never bore fruit,” the Congress leader added.
He said the Hindenburg Research’s Saturday revelations show that Buch and her husband invested in the same Bermuda and Mauritius-based offshore funds in which “Vinod Adani and his close associates Chang Chung-Ling and Nasser Ali Shahban Ahli invested funds earned from the over-invoicing of power equipment”.
“These funds are believed also to have been used to amass large stakes in Adani Group companies in violation of SEBI regulations. It is shocking that Buch would have a financial stake in these same funds,” Ramesh said.
The Congress leader said the revelation raise fresh questions about Gautam Adani’s two 2022 meetings in quick succession with Buch, shortly after she became the stock market regulator’s chairperson.
“The government must act immediately to eliminate all conflicts of interest in the SEBI investigation of Adani. The fact is that the seeming complicity of the highest officials of the land can only be resolved by setting up a JPC (joint parliamentary committee) to investigate the full scope of the Adani mega scam,” the former Union minister said in his statement.
Earlier, tagging the Hindenburg post on the allegations on X, Ramesh had said, “Quis Custodiet Ipsos Custodes (who will guard the guards themselves).”
Congress’ media and publicity department head Pawan Khera said on Sunday that the shocking revelations of the Hindenburg Report do not just expose the “cozy relationship” between the SEBI chief and the Adani group, they show how appointments to watchdog institutions are made in this government.
“A simple due diligence done by the government before appointing Ms Madhabi Puri Buch as SEBI Chairperson would have brought these damning details out,” he said in a post on X.
It would be naive to believe that those in the government were not aware of these offshore investments of Madhabi Puri Buch and Dhaval Buch, Khera said.
“The buck stops at the doorstep of the Prime Minister of India. Only a JPC can get all the answers,” he asserted.
In January last year, Hindenburg Research 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 USD 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.
The SEBI had last year told a Supreme Court-appointed panel that it was investigating 13 opaque offshore entities that held between 14 per cent and 20 per cent across five publicly traded stocks of the conglomerate.
It hasn’t stated if the two incomplete probes have since been completed. (PTI)
