Hindenburg Hit Again; Alleges Adani-Sebi Chief Collusion

The Hindenburg Research has once again targeted the Adani Group, this time with explosive allegations against the Securities and Exchange Board of India (SEBI) and its Chairperson, Madhabi Buch. Nearly 18 months after Hindenburg’s initial report labelled the Adani Group’s operations as “the largest con in corporate history,” the research firm has unveiled new claims of a deep-seated conflict of interest within SEBI, accusing its Chairperson and her husband of holding stakes in offshore funds allegedly tied to the Adani money-laundering scandal.

Meanwhile, the Buchs have vehemently denied the latest allegations levelled against them by Hindenburg Research. In a strong response to the accusations, the Buchs stated that the claims made by Hindenburg are baseless and devoid of any truth, emphasising that their “life and finances are an open book” and that all required disclosures have been furnished to SEBI over the years. In their statement, the Buchs also criticised Hindenburg Research for what they describe as an attempt at “character assassination,” pointing out that SEBI had previously taken enforcement action against Hindenburg and issued a show cause notice. The Buchs implied that the allegations in the report are a retaliatory response to SEBI’s actions.

The Initial Allegations

Hindenburg’s initial report, published in January 2023, was a scathing indictment of the Adani Group, revealing a complex web of offshore shell entities—primarily based in Mauritius—that were allegedly used for billions of dollars in undisclosed transactions and stock manipulation. Despite widespread media coverage and over 40 independent investigations supporting Hindenburg’s claims, SEBI has taken little public action against Adani. Instead, in June 2024, SEBI issued a show-cause notice to Hindenburg, accusing the firm of failing to adequately disclose its short positions on Adani stocks. The regulator’s notice also deemed Hindenburg’s report “reckless” for citing a banned broker who claimed that SEBI was aware of Adani’s activities and even participated in them.

Read also: “Government Must Act To Eliminate All Conflicts Of Interest”: Congress On Hindenburg Report

New Allegations of Collusion

In its latest report, Hindenburg alleges that Madhabi Buch, the current SEBI Chairperson, and her husband, Dhaval Buch, have stakes in the very offshore funds tied to the Adani money siphoning scandal. According to whistleblower documents, the Buchs held investments in the IPE Plus Fund 1, a small, obscure Mauritius-registered offshore fund. This fund is part of a convoluted structure involving entities controlled by Vinod Adani, brother of Adani Group founder Gautam Adani, who allegedly funneled money through these offshore accounts via over-invoicing of power equipment.

Read also: “Character Assassination”: Madhabi, Dhaval Respond to Hindenburg Report

NEW FROM US:

Whistleblower Documents Reveal SEBI’s Chairperson Had Stake In Obscure Offshore Entities Used In Adani Money Siphoning Scandalhttps://t.co/3ULOLxxhkU

— Hindenburg Research (@HindenburgRes) August 10, 2024

Conflict of Interest at SEBI

The whistleblower documents reveal that Madhabi Buch opened an account with IPE Plus Fund 1 in Singapore in June 2015, two years before her appointment as a Whole-Time Member of SEBI in April 2017. Just before her SEBI appointment, her husband requested that the fund administrator transfer all assets under his sole control, seemingly to distance Madhabi from these holdings before she took up her regulatory role. This move raises serious questions about a potential conflict of interest, particularly given SEBI’s role in regulating the very industry where the Buchs held offshore investments.

Further compounding the issue, during Madhabi Buch’s tenure as a Whole-Time Member at SEBI, her husband was appointed as a Senior Advisor to Blackstone, one of India’s largest private equity firms and a major sponsor of Real Estate Investment Trusts (REITs) in the country. SEBI, under Buch’s leadership, has introduced several regulatory changes that have directly benefited Blackstone, further fueling allegations of regulatory capture.

Read also: SEBI Under Fire As Hindenburg Report Ignites Storm: Top Leaders React

Implications for the Adani Investigation

Hindenburg suggests that SEBI’s reluctance to take meaningful action against Adani may be linked to these financial entanglements. The Supreme Court of India had earlier noted that SEBI had “drawn a blank” in its investigation into Adani’s offshore shareholders. Hindenburg argues that SEBI’s apparent unwillingness to follow the money trail could be because its Chairperson was herself invested in the same offshore funds under scrutiny.

The report also highlights SEBI’s lack of action against other suspect funds tied to Adani, such as EM Resurgent Fund and Emerging India Focus Funds, both operated by India Infoline (now 360 One). These funds have been accused of inflating Adani stock prices, yet SEBI has not taken any decisive steps against them. Hindenburg’s findings raise significant concerns about SEBI’s objectivity and ability to regulate the Indian financial markets effectively.

Buch’s Consultancy Ventures

Adding to the controversy, Hindenburg uncovered that Madhabi Buch owns a 99% stake in an Indian consultancy firm, Agora Advisory Private Limited, where her husband serves as a director. In 2022, this entity reported significant revenues from consulting, amounting to four times Buch’s disclosed SEBI salary. This revelation, combined with the Buchs’ offshore investments and Dhaval Buch’s advisory role at Blackstone, further muddies the waters regarding potential conflicts of interest within SEBI.

Hindenburg’s latest report paints a troubling picture of regulatory capture at the highest levels of India’s financial watchdog. The implications of these allegations are profound, suggesting that SEBI, under Madhabi Buch’s leadership, may have failed to act against Adani due to personal financial interests. As these revelations come to light, the credibility of SEBI and its ability to regulate the Indian markets are now under intense scrutiny.

Hindenburg Report: 10 Important Points:

1. Hindenburg Research accuses SEBI Chairperson Madhabi Buch of holding stakes in offshore funds tied to Adani’s alleged money laundering.
2. SEBI has shown little interest in pursuing Adani despite overwhelming evidence and 40 independent investigations.
3. SEBI issued a show-cause notice to Hindenburg, accusing the firm of inadequate disclosure of its short positions.
4. Madhabi Buch and her husband invested in the IPE Plus Fund 1, part of a complex offshore structure linked to Adani.
5. Just before her SEBI appointment, Dhaval Buch transferred control of these investments out of his wife’s name.
6. During Madhabi Buch’s SEBI tenure, her husband was appointed Senior Advisor to Blackstone, a major REIT sponsor in India.
7. SEBI introduced regulations that significantly benefited Blackstone while Madhabi Buch was in office.
8. The Supreme Court noted SEBI’s failure to identify Adani’s offshore shareholders, raising questions about the regulator’s effectiveness.
9. SEBI has not acted against other suspect funds tied to Adani, despite evidence of stock manipulation.
10. Madhabi Buch owns a 99% stake in Agora Advisory Private Limited, which reported significant consulting revenues in 2022.