SEBI chairperson dismisses Hindenburg’s allegations as baseless character assassination

Hindenburg Research, a short-selling firm based in the US, has released a new investigative report alleging that Madhabi Puri Buch, the chairperson of the Securities and Exchange Board of India (SEBI), was involved with obscure offshore entities linked to Adani's alleged financial misconduct.

SEBI chairperson Madhabi Puri Buch and her husband, Dhaval Buch, have dismissed these allegations as baseless, false, and a form of character assassination.

In response to Hindenburg's claims, SEBI had previously flagged violations by the firm and its owner, Nathan Anderson, citing breaches of the SEBI Act, regulations on fraudulent and unfair trade practices, and the Code of Conduct for Research Analysts.

The SEBI chairperson has also expressed her willingness to provide any financial documents required by the authorities to address the allegations.

“In the context of allegations made in the Hindenburg Report dated Aug 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,” said Madhabi.

“Our lives and finances are an open book. All disclosures as required have already been furnished to SEBI over the years. We 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,” she added.

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

The Hindenburg report alleged that in 2019, Dhaval Buch, husband of SEBI Chairperson Madhabi Puri Buch, was appointed as an advisor to Blackstone, a major global private equity firm heavily invested in real estate investment trusts (REITs).

The report suggested that during Dhaval Buch’s tenure, SEBI enacted various REIT regulations that significantly benefited Blackstone.

“During Dhaval Buch’s time as advisor to Blackstone, SEBI has proposed, approved, and facilitated major REIT regulation changes. These include seven consultation papers, three consolidated updates, two new regulatory frameworks, and nomination rights for units, specifically benefiting private equity firms like Blackstone," the Hindenburg report said.

In July 2024, US-based short-seller Hindenburg Research said it received a show-cause notice from India's securities regulator. Characterizing the SEBI’s show cause notice as attempted intimidation, Hindenburg wrote that the regulator had made the nebulous allegation that Hindenburg’s report contained misrepresentations and inaccurate statements meant to mislead readers.

“In our view, SEBI has neglected its responsibility, seemingly doing more to protect those perpetrating fraud than to protect the investors being victimized by it," Hindenburg had said.

The Hindenburg report, released on Aug 10, asserted that SEBI Chairperson Madhabi Puri Buch and her husband were invested in obscure offshore funds implicated in the Adani money siphoning scandal.

“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," reads the Hindenburg report.

In its report, Hindenburg said, “It has been nearly 18 months since our original report on the Adani Group presented overwhelming evidence that the Indian conglomerate was operating the largest con in corporate history. Our report exposed a web of offshore, primarily Mauritius-based shell entities used for suspected billions of dollars of undisclosed related party transactions, undisclosed investment, and stock manipulation.''

“Since then, despite the evidence, along with over 40 independent media investigations corroborating and expanding on our original work, Indian securities regulator SEBI has taken no public action against the Adani Group. The media has reported that SEBI is likely to impose mere token technical violations on the Adani Group despite the breadth and magnitude of the issues,'' added Hindenburg in its report.

“The Indian Supreme Court said that SEBI had drawn a blank in its investigation of these shareholders, as detailed in the court records. In late June 2024, Adani chief financial officer (CFO) Jugeshinder Singh described some regulator notices aimed towards Adani Group as trivial, apparently writing off the prospect of their severity even before the process was concluded,'' said Hindenburg in its report on Aug 10.

“IPE Plus Fund is a small offshore Australian fund set up by an Adani director through India Infoline (IIFL), a wealth management firm with ties to the wirecard scandal,'' said Hindenburg.

“Vinod Adani, the brother of Gautam Adani, used this structure to invest in Indian markets with funds allegedly siphoned from overinvoicing of power equipment to the Adani group,'' added the US short-seller.

“As detailed in our original Adani report, documents from the Directorate of Revenue Intelligence (DRI) alleged that Adani grossly overvalued the import valuation of key power equipment, using offshore shell entities to siphon and launder money from the Indian public,'' said Hindenburg in its report.

In Dec 2023, a follow-up investigation by the non-profit project Adani Watch revealed that a network of offshore entities, managed by Gautam Adani’s brother Vinod Adani, received funds linked to the alleged over-invoicing of power equipment.

“In one complex structure, a Vinod Adani-controlled company had invested in the Global Dynamic Opportunities Fund (GDOF) in Bermuda, a British overseas territory and tax haven, which then invested in IPE Plus Fund 1, a fund registered in Mauritius, another tax haven,'' said Hindenburg.

Hindenburg said in its report, "A separate investigation by the Financial Times showed that the parent fund of GDOF—the Bermuda-based Global Opportunities Fund (GOF)—was used by two Adani associates to amass and trade large positions in shares of the Adani Group.”

The nested funds in question are managed by Indian Infoline, now known as 360 One, according to private fund data and IIFL’s marketing materials. IIFL, a publicly listed wealth management firm in India, has a history of creating complex fund structures and was previously linked to the Wirecard scandal, Germany's largest fraud case.

IIFL Wealth faced allegations of fraud in a Wirecard takeover deal involving a Mauritius fund structure, as noted in a UK lawsuit.

Hindenburg's report reveals that Madhabi Buch and her husband Dhaval Buch opened an account with IPE Plus Fund 1 in Singapore on June 5, 2015.

A declaration of funds from IIFL states that their investment source is salary, with their net worth estimated at $10 million. Madhabi Buch became a Whole-Time Member of SEBI in April 2017.

On March 22, 2017, just weeks before her SEBI appointment, Dhaval Buch contacted the Mauritius fund administrator, Trident Trust, about their investment in the Global Dynamic Opportunities Fund.

“In the letter, Dhaval Buch requested to be the sole person authorized to operate the accounts, seemingly moving the assets out of his wife’s name ahead of the politically sensitive appointment,'' said Hindenburg in its report.

Hindenburg accusations ignited a fierce debate on X, with several prominent voices weighing in. Political reactions also started coming in with the Congress demanding an investigation by a Joint Parliamentary Committee and asking the government to act immediately to eliminate all conflicts of interest in the SEBI investigation of Adani.

Adani Group has dismissed the latest allegations from Hindenburg Research, terming them as malicious, mischievous, and manipulative.

"The latest allegations by Hindenburg are malicious, mischievous, and manipulative selections of publicly available information to arrive at predetermined conclusions for personal profiteering with wanton disregard for facts and the law,” reads the statement by Adani Group.

“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,” it added.

It continued, “It is reiterated that our overseas holding structure is fully transparent, with all relevant details disclosed regularly in numerous public documents. Furthermore, Anil Ahuja was a nominee director of the 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,” reads the statement.

“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," Adani Group said.

Congress spokesperson Pawan Khera said, "The government of India had paid no attention to any special investigation. Hindenburg came out with another report, and all the doings of SEBI Chief Madhabi Buch and her husband Dhaval Buch are before everyone now. Their investments in offshore companies are before everyone.”

“These are those companies in which Gautam Adani's brother Vinod Adani has also made investments. The question is, when Madhabi Buch was appointed as the SEBI Chairman, did the Government of India not know about this? If they did not know, then it was a major failure. If they knew about it, then the PM of India himself is a part of this conspiracy,” he added.

“We are not asking anything from SEBI Chief or Gautam Adani; we ask the Prime Minister of the country—did your government, which considers itself very alert, not know about it? Nothing will be found through anything less than the Joint Parliamentary Committee (JPC). There should be JPC, and only through that will all answers come out,” Khera said.

On the Hindenburg report, Congress Member of Parliament Shashi Tharoor says, “These are serious matters. I am not aware of the details. Any such allegations must be answered satisfactorily or investigated. We can't leave these things hanging up there and casting a cloud on the integrity of our system. It is important that either a satisfactory explanation is given by the people accused or there should be an investigation.”

Former Infosys CFO Mohandas Pai has termed the latest allegations as “character assassination by a Vulture Fund.”

Defending SEBI’s regulations on REITs, Pai said, “All regulations of SEBI are made after open consultations. The regulations demonstrate collective thinking of the market and regulators based on global benchmarks.”

Deepak Shenoy, chief executive officer (CEO) of Capitalmind, believes the allegations levied by US-based short seller Hindenburg Research have ‘hardly any substance’. Replying to a post on social media platform X, Shenoy said, “Thoda zyada ho gaya, I feel, basically they have gone into sensationalism. There is hardly any substance."