Decoding: What Did Hindenburg Reveal About The SEBI Chief This Time?

Hindenburg Research, based in New York, has released new evidence to support its claims regarding insider trading and other stock market violations by the Adani Group. The allegations are being investigated by India's financial regulator, the Securities and Exchange Board of India (SEBI). Hindenburg's latest report includes emails and public records showing stakes held by SEBI Chairman Madhabi Puri Buch and her husband Dhaval Buch in Adani Group-related entities through offshore investment funds. This is alleged to indicate a conflict of interest that benefited the Adani Group. Both Ms. Buch and the Adani Group have denied these allegations.

Central to these accusations are the Buchs' supposed "hidden stakes" in offshore funds located in Bermuda and Mauritius, both known tax havens. Hindenburg highlights two main concerns: a conflict of interest and potential collusion. According to investigations by the Organized Crime and Corruption Reporting Project (OCCRP), Vinod Adani, brother of Adani Group Chairman Gautam Adani, invested in the Bermuda-based Global Dynamic Opportunities Fund (GDOF), which then invested in the Mauritius-based IPE Plus Fund 1. A Financial Times investigation revealed that GDOF's parent fund, Global Opportunities Fund (GOF), was used by two Adani associates to manipulate stock prices.

Conflict of Interest Allegations

The short seller also points out that Anil Ahuja, founder and Chief Investment Officer (CIO) of IPE Plus Fund, served as a director at Adani Enterprises for nine years until 2017. The Buchs opened an account with this Mauritius-based fund in 2015. Hindenburg suggests that SEBI's alleged reluctance to take "meaningful action" could be due to Ms. Buch's involvement with the same funds as Mr. Adani.

Another set of accusations involves professional engagements. In 2013, Ms. Buch established a consulting firm called Agora Partners in India and Singapore. She became a whole-time member of SEBI in April 2017 before being promoted to chairperson in March 2022. SEBI's Code on Conflict of Interests for Board Members states that whole-time members cannot hold any office of profit or engage in any professional activity involving fees or payment. However, Hindenburg accuses her of transferring only her 100% stake in the Singapore unit after her appointment to SEBI's top post, and that too only in 2022.

Professional Engagements Under Scrutiny

The final set of accusations concerns Dhaval Buch. Despite lacking experience in real estate or fund management, he was appointed senior advisor at Blackstone investment management firm in 2019. With Ms. Buch employed at SEBI and later leading it, Hindenburg alleges that SEBI "proposed, approved and facilitated" significant changes to real-estate investment trusts' (REITs) policies and listing rules, benefiting Blackstone — one of India's largest REIT sponsors.

In response to these allegations, the Buchs issued a detailed statement clarifying that their investments were made two years before Ms. Buch joined SEBI. They explained that they invested based on Mr. Ahuja's "strong investing career" and his personal connection as Mr. Buch's "childhood friend" and batchmate from IIT Delhi. They also noted redeeming their investment when Mr. Ahuja stepped down as CIO in 2018.

Buchs' Response

The joint statement emphasised that at no point did the fund invest in any bond, equity or derivative related to the Adani conglomerate. However, Hindenburg responded on 'X', stating that their response only confirmed their investment in the offshore fund while Mr. Ahuja was still a director at Adani Group until 2017.

Hindenburg also highlighted communications from Ms. Buch between 2017 and 2018 where Mr. Buch sought full ownership transfer to him but did not specify further actions taken thereafter.

The ongoing investigation into these allegations continues to unfold with both sides presenting their arguments vigorously.