After Adani, Hindenburg targets SEBI chief, she calls allegations baseless, character assassination

Who Invested When

• Hindenburg alleged that Madhabi, her husband invested in offshore entities
• Which are allegedly part of a fund managed by India Infoline, in which Vinod Adani also had investments
• These investments reportedly date back to 2015
• Madhabi Puri’s appointment as whole-time member of Sebi in 2017
• Subsequent elevation as chairperson in March 2022

New Delhi: Securities and Exchange Board of India (Sebi) Chairperson Madhabi Puri Buch and her husband Dhaval Buch strongly denied the allegation levelled by Hindenburg Research against them, calling it a ‘character assassination attempt’ because an Enforcement action and show cause notice was issued to the Nate Anderson-led company last month.

In a statement, they 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”.

The markets regulator last month said that Hindenburg and Anderson violated regulations under ‘Sebi’s Prevention of Fraudulent and Unfair Trade Practices’ regulations, and Sebi’s Code of Conduct for Research Analyst’ regulations.

According to the joint statement issued by the couple, “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”.

“Further, in the interest of complete transparency, we would be issuing a detailed statement in due course,” they added.

Short-sellers like Hindenburg Research could find themselves in hot water, as even the US market regulator, the Securities and Exchanges Commission (SEC), has been tightening its grip.

US short-seller Hindenburg Research has alleged that it suspects Sebi’s unwillingness to act against Adani Group may be because of its head Madhabi Puri Buch had stakes in offshore funds linked to the conglomerate - an allegation that the Sebi head called ‘baseless’ and an attempt of ‘character assassination’.

Hindenburg alleged that Buch and her husband had undisclosed investments in obscure offshore funds in Bermuda and Mauritius, the same entities allegedly used by Vinod Adani - the elder brother of group Chairman Gautam Adani - to round-trip funds and inflate stock prices. Sebi in October 2020 began a probe into the shareholding structure of Adani Group companies after red flags were raised over high concentration of foreign holdings in the conglomerate’s listed companies.

Investigation was launched to determine if the foreign investors are genuine public shareholders or acting as fronts for the promoters. Sebi 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, something which Hindenburg used to attack the market regulator. Madhabi and her husband Dhaval Buch in a joint statement strongly denied the ‘baseless allegations and insinuations made in the report’.

The same, they said, “are devoid of any truth. Our life and finances are an open book,” they 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.”

While the statement did not talk on the questions Hindenburg raised over Sebi probe, the duo promised to come out with a detailed response. Hindenburg on Saturday stated that the Madhabi and her husband invested in offshore entities that were allegedly part of a fund structure managed by India Infoline and in which Vinod Adani also had investments.

These investments reportedly date back to 2015, well before her appointment as a whole-time member of Sebi in 2017 and the subsequent elevation as chairperson in March 2022. It said Bermuda-based Global Opportunities Fund, which allegedly was used by entities connected to Adani Group to trade in shares of group companies, had sub-funds. Buch and her husband were investors in one of these sub-funds in 2015. Citing "whistleblower documents", Hindenburg 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." Sebi, it claimed, has "shown a surprising lack of interest in Adani's alleged undisclosed web of Mauritius and offshore shell entities." The Buchs 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 Vinod Adani through India Infoline (IIFL), a wealth management firm with ties to the Wirecard embezzlement scandal. "Vinod...used this structure to invest in Indian markets with funds allegedly siphoned from over invoicing of power equipment to Adani Group," claimed Hindenburg.

Latching on to the Hindenburg allegations, Congress said the revelations only reinforced its demand for setting up a "joint parliamentary committee to investigate the full scope of the Adani mega scam" while the Trinamool Congress said the SebiChairperson must resign. In January last year, Hindenburg 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.

After the Hindenburg report, the SC 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 one being done by Sebi was required.

On June 26 this year, Sebi in a show cause notice charged Hindenburg of "deliberately sensationalising and distorting certain facts" as well as working with a New York hedge fund to make its bet. Hindenburg had responded to that saying 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 group creating "a vast network of offshore shell entities" and moving billions of dollars "surreptitiously" into and out of Adani public and private entities. Gautam Adani, who was the world's third-richest man before Hindenburg, in an epic comeback strategy raised $15 billion in equity and debt, sold some assets, repaid loans that was raised pledging shares, reined in expenses and refocused energies on core business. Adani is now ranked 12th richest in the world. The group has also made some acquisitions, buying cement company Sanghi Industries and the news agency IANS. Hindenburg on Saturday alleged that just weeks before Buch’s appointment to Sebi, her husband requested the transfer of their investments into his sole control, potentially to avoid any scrutiny related to her new regulatory role. The couple’s investments were reportedly funnelled through a complex, multi-layered offshore structure, raising questions about their legitimacy and purpose. On March 22, 2017, just weeks ahead of Buch’s appointment as Sebi whole-time member, Dhaval wrote to Mauritius fund administrator Trident Trust. That communication was regarding his and his wife’s investment in the Global Dynamic Opportunities Fund (GDOF), the US firm alleged. “In the letter, Dhaval 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,” Hindenburg alleged. Dhaval is a senior advisor at Blackstone and at Alvarez & Marsal. He also serves as a non-executive director on the Board of Gildan.