Sebi chairperson Madhabi Puri Buch.
Credit: X/@intradaygeeks
New Delhi: SEBI on Sunday said it has completed all but one investigation into allegations against the Adani group as it responded to US short-seller Hindenburg Research's charge of going slow on the probe, potentially because its chairperson was invested in funds at the heart of the probe - an allegation market regulator head said was "baseless" and an attempted "character assassination".
The allegations ranging from using offshore investment funds to inflate stock price and non-disclosure of related party interest that Hindenburg first levied in its damning report against the Adani group in January 2023, have been "duly investigated by SEBI", the regulator said in a statement.
SEBI said two of the 24 investigations against Adani group were pending when the Supreme Court last passed an order on the issue in January this year. Subsequent to that, one investigation was completed and the one remaining is close to completion.
During the probe, it said, more than 100 summons were issued and more than 300 documents containing around 12,000 pages have been examined.
"Pursuant to the completion of investigations, SEBI initiates enforcement proceedings which are quasi-judicial in nature involving notices and hearings before orders are passed, which are made public, the regulator said without disclosing the content of its investigation against Adani.
SEBI said as a matter of policy it refrains from commenting on any investigation/ongoing enforcement matter.
Hindenburg on Saturday alleged that SEBI chairperson Madhabi Puri 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.
Madhabi Puri Buch and her husband Dhaval Buch in a joint statement strongly denied the "baseless allegations and insinuations made in the report", saying the charges were "devoid of any truth".
SEBI too defended its chairperson. In a two-page statement, it said Buch had made relevant disclosures from time to time and she "had also recused herself in matters involving potential conflicts of interest."
Adani group too denied any commercial dealings with the SEBI head, while wealth management entity 360ONE - formerly called as IIFL Wealth Management - separately said Buch and her husband Dhaval Buch's investment in IPE-Plus Fund 1 was less than 1.5 per cent of the total inflows and that it did not make any investments in Adani Group shares.
The investments were made in 2015, well before her appointment as a whole-time member of SEBI in 2017 and the subsequent elevation as chairperson in March 2022, and in capacity as "private citizens living in Singapore", Buchs said.
According to the statement, investment in the two funds was made on advice of Dhaval's childhood friend, Anil Ahuja - the person which Hindenburg report identified as the founder and Chief Investment Officer (CIO) of the Mauritius-based IPE Plus Fund.
The Adani group also in its statement said Ahuja was a nominee of 3i Investment Fund in Adani Power (2007-2008) and served as a director of Adani Enterprises for three terms spanning nine years ending in June 2017.
SEBI in October 2020 began a probe into 13 opaque offshore entities that held between 14 per cent and 20 per cent across five publicly traded stocks of the conglomerate to determine if the foreign investors are genuine public shareholders or acting as fronts for the promoters.
Citing "whistleblower documents, Hindenburg on Saturday stated that the SEBI chairperson 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.
It said the 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.
Hindenburg claimed SEBI has "shown a surprising lack of interest in Adani's alleged undisclosed web of Mauritius and offshore shell entities."
Buchs said Hindenburg has been sent a show cause notice for "a variety of violations in India."
In the June 26 show cause notice, SEBI charged Hindenburg of "deliberately sensationalising and distorting certain facts" in its January 2023 report that 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.
"It is unfortunate that instead of replying to the show cause notice, they have chosen to attack the credibility of the SEBI and attempt character assassination of the SEBI chairperson," the statement by Buchs said.
SEBI said the proceedings in the showcase to Hindenburg are ongoing and "the same is being dealt with in accordance with established procedure and in compliance with the principles of natural justice."
Buchs further said they 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.
The statement however did not talk on the questions Hindenburg raised over the incomplete SEBI probe against Adani.
Separately, Adani group companies in identical regulatory filings called the allegations by Hindenburg as "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."
"The Adani Group has absolutely no commercial relationship with the individuals or matters mentioned in this calculated deliberate effort to malign our standing," it said. "We remain steadfastly committed to transparency and compliance with all legal and regulatory requirements".
Rejecting the allegations, it said they were nothing but "recycling of discredited claims that have been thoroughly investigated, proven to be baseless and already dismissed by the Supreme Court in March 2023."
"It is reiterated that our overseas holding structure is fully transparent, with all relevant details disclosed regularly in numerous public documents," Adani group said adding Anil Ahuja was a nominee director of 3i investment fund in Adani Power (2007-2008) and, later, a director of Adani Enterprises until 2017.
"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," it added.
Hindenburg said Buch and her husband 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 Adani director through India Infoline (IIFL), a wealth management firm with ties to the Wirecard embezzlement scandal.
"Vinod Adani, brother of Gautam Adani, 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 SEBI chairperson must resign.
Left parties too supported the demand for a JPC.
Congress president Mallikarjun Kharge said the Securities and Exchange Board of India (SEBI) previously cleared Adani before the Supreme Court following the January 2023 Hindenburg Report revelations. However, new allegations have surfaced regarding a "quid-pro-quo" involving the SEBI chief, he said, demanding government action on the same.
The BJP countered the opposition saying they were part of a conspiracy to create financial instability and chaos in India, and rejected Hindenburg allegations against the SEBI chairperson as an attempt to discredit the financial watchdog.
Though Adani group vehemently denied all allegations in the January 2023 report of Hindenburg, which in the past has shorted - or bet against - companies like electric truck maker Nikola Corp and Twitter, it sent the group's shares into a free fall, wiping out over USD 150 billion in market value of the 10 listed entities at their lowest point. Most of the 10 listed companies have since recoupled the losses.
After the Hindenburg report, the Supreme Court asked market regulator 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 USD 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 conglomerate creating "a vast network of offshore shell entities" and moving billions of dollars "surreptitiously" into and out of Adani public and private entities.
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 investment in the two offshore entities, Buch duo in the statement said the entities became "dormant" on her appointment at SEBI and added that her shareholding in them was also disclosed to SEBI.
On Hindenburg charge of Dhaval Buch on March 22, 2017, just weeks ahead of his wife being appointed SEBI wholetime member, writing to Mauritius fund administrator Trident Trust that he be made "the sole person authorised to operate the accounts", the duo said, "When the shareholding of the Singapore entity moved to Dhaval, this was once again disclosed, not just to SEBI, but also to the Singapore authorities and the Indian tax authorities," it said adding that Sebi has strong institutional mechanisms on disclosure and recusal norms.