August 11th 2024.
In a recent statement, the Securities and Exchange Board of India (SEBI) addressed concerns raised by US-based short-seller Hindenburg Research regarding the Adani Group. Hindenburg had accused SEBI of intentionally delaying their investigation into the group, suggesting that this was due to the fact that SEBI's chairperson had invested in funds involved in the probe. However, SEBI dismissed this allegation as baseless and an attempt to discredit their character.
The allegations against the Adani Group, including using offshore investment funds to inflate stock prices and not disclosing related party interests, were first brought to light by Hindenburg in their report from January 2023. In their statement, SEBI clarified that they have already thoroughly investigated these accusations and that only one investigation remains pending. Of the 24 investigations against the Adani Group, two were still ongoing at the time of the Supreme Court's January 2022 ruling on the matter. Since then, one of these investigations has been completed and the other is close to completion.
During their investigations, SEBI issued over 100 summons and examined more than 300 documents comprising of approximately 12,000 pages. Once the investigations are completed, SEBI will initiate enforcement proceedings, which involve a quasi-judicial process that includes notices and hearings before any public orders are passed. However, SEBI did not disclose any details about their investigation into the Adani Group.
SEBI also stated that as a policy, they do not comment on ongoing investigations or enforcement matters. This comes after Hindenburg's claim that SEBI's chairperson, Madhabi Puri Buch, and her husband had undisclosed investments in offshore funds in Bermuda and Mauritius, the same entities that Vinod Adani, the elder brother of group chairman Gautam Adani, had allegedly used to round-trip funds and inflate stock prices. In a joint statement, Buch and her husband vehemently denied these allegations, stating that they were devoid of any truth.
SEBI also came to the defense of their chairperson, stating that Buch had made all relevant disclosures and had recused herself from any matters that may have posed a conflict of interest. The Adani Group also denied any commercial dealings with Buch, while wealth management entity 360ONE (formerly known as IIFL Wealth Management) confirmed that Buch's investment in the IPE-Plus Fund 1 was less than 1.5% of the total inflows and that they did not make any investments in Adani Group shares.
According to Buch, the investments were made in 2015, well before she was appointed as a whole-time member of SEBI in 2017 and subsequently elevated to chairperson in March 2022. She clarified that these investments were made in her capacity as a private citizen living in Singapore and were based on the advice of her husband's childhood friend, Anil Ahuja, who is the founder and Chief Investment Officer of the Mauritius-based IPE Plus Fund.
The Adani Group also stated that Ahuja had been a nominee of 3i Investment Fund in Adani Power and had served as a director of Adani Enterprises for three terms spanning nine years until June 2017. In October 2020, SEBI had initiated a probe into 13 opaque offshore entities that held significant stakes in five publicly traded stocks of the conglomerate, in order to determine if these foreign investors were genuine public shareholders or acting as fronts for the promoters.
Hindenburg, citing whistleblower documents, alleged that Buch and her husband had invested in offshore entities that were part of a fund structure managed by India Infoline, in which Vinod Adani also had investments. They claimed that the Bermuda-based Global Opportunities Fund, which was allegedly used by entities connected to the Adani Group to trade in shares of group companies, had multiple sub-funds. Buch and her husband were investors in one of these sub-funds in 2015.
Hindenburg also accused SEBI of showing a lack of interest in Adani's alleged undisclosed web of Mauritius and offshore shell entities. In response, Buch clarified that Hindenburg had been served a show cause notice for a variety of violations in India. In this notice from June 26, SEBI had charged Hindenburg with deliberately sensationalizing and distorting certain facts in their January 2023 report, which had accused the Adani Group of pulling off the largest con in corporate history by using a web of companies in tax havens to inflate revenues and manipulate stock prices, while accumulating debt.
Buchs stated that it was unfortunate that Hindenburg had chosen to attack the credibility of SEBI and attempt to discredit the chairperson, instead of responding to the show cause notice. In conclusion, SEBI assured that they will continue to carry out their investigations and take necessary action, following due process and in line with their duty to protect the interests of investors.
The Securities and Exchange Board of India (SEBI) has recently addressed allegations made by US short-seller Hindenburg Research against the Adani Group. Hindenburg had accused SEBI of not being thorough in their investigations, possibly because the chairperson had investments in the same funds that were under scrutiny. However, SEBI has dismissed these accusations as baseless and a deliberate attempt to damage the reputation of the market regulator.
The allegations against the Adani group, which were first brought to light by Hindenburg in January 2023, included using offshore investment funds to artificially inflate stock prices and not disclosing related party interests. In response, SEBI has stated that they have conducted thorough investigations into these allegations and have completed all but one of the 24 investigations against the Adani group. The remaining investigation is close to completion.
During the course of the probe, SEBI issued more than 100 summons and examined over 300 documents, which amounted to around 12,000 pages. However, due to the quasi-judicial nature of enforcement proceedings, the details of the investigations cannot be disclosed to the public. It is also worth noting that SEBI has a policy of refraining from commenting on any ongoing investigations or enforcement matters.
Hindenburg had also alleged that the SEBI chairperson, Madhabi Puri Buch, and her husband had undisclosed investments in offshore funds in Bermuda and Mauritius. These same funds were allegedly used by Vinod Adani, the elder brother of Adani Group chairman Gautam Adani, to round-trip funds and manipulate stock prices. However, Buch and her husband have strongly denied these claims, stating that they have made all relevant disclosures and have recused themselves from any matters involving potential conflicts of interest.
The Adani group has also denied any commercial dealings with the SEBI chairperson. Similarly, wealth management entity 360ONE (formerly known as IIFL Wealth Management) has clarified that Buch and her husband's investments in IPE-Plus Fund 1 were made before her appointment as a whole-time member of SEBI in 2017. They further stated that these investments were made on the advice of Buch's childhood friend, Anil Ahuja, who was identified in the Hindenburg report as the founder and Chief Investment Officer of the Mauritius-based IPE Plus Fund.
Hindenburg had also alleged that SEBI showed a lack of interest in Adani's alleged undisclosed web of Mauritius and offshore shell entities. However, Buch has clarified that Hindenburg has been issued a show cause notice for various violations in India. In response, Hindenburg has accused SEBI of deliberately sensationalizing and distorting facts in their January 2023 report, which accused Adani Group of engaging in fraudulent activities. Buch has stated that instead of addressing the show cause notice, Hindenburg has chosen to attack the credibility of SEBI and attempt to assassinate the character of the SEBI chairperson.
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