In a startling revelation, U.S.-based short-seller Hindenburg Research has alleged that Madhabi Puri Buch, the chairperson of India’s market regulator, the Securities and Exchange Board of India (SEBI), previously held investments in offshore funds that were also utilized by the Adani Group. This new report, released on Saturday, has sent shockwaves through the financial and political landscape of India.
The Allegations
Hindenburg Research, known for its critical reports on major corporations, claims that Buch and her husband had stakes in obscure offshore funds, which were allegedly used by the Adani Group for financial misconduct. The report cites whistleblower documents that suggest Buch and her husband were investors in these funds as far back as 2015.
According to the report, these investments were made in a Bermuda-based Global Opportunities Fund, which was allegedly used by entities connected to the Adani Group to trade in the shares of group companies. The whistleblower documents indicate that in 2017, before Buch was appointed as a whole-time member of SEBI, her husband requested to be the sole operator of the account.
The Response
In a late-night press statement, Buch denied the allegations, calling them baseless and stating that a detailed response would be issued later. The Adani Group has also denied these allegations, maintaining that they have always complied with regulatory requirements.
Political Repercussions
The report has sparked fresh criticism from India’s opposition political parties, who are demanding a parliamentary probe into the matter. They argue that these allegations, if proven true, could indicate a severe conflict of interest and undermine the credibility of SEBI.
Background on Hindenburg’s Previous Reports
This is not the first time Hindenburg Research has targeted the Adani Group. In January 2023, Hindenburg released a report alleging improper use of tax havens and stock manipulation by the Adani Group, which led to a $150 billion sell-off in the conglomerate’s stocks despite its denials of wrongdoing. The stocks have since partially recovered, but the 2023 report led to an ongoing enquiry by SEBI.
The Offshore Funds
The latest report by Hindenburg attempts to draw a link between offshore funds that traded in Adani Group shares and the personal investments of Buch and her husband. It alleges that the Bermuda-based Global Opportunities Fund had sub-funds, one of which Buch and her husband were investors in. The report claims 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.
SEBI’s Role and Actions
SEBI has been under scrutiny for its handling of the Adani Group’s alleged financial misconduct. In May, six Adani Group companies disclosed they had received notices from SEBI alleging violations of Indian stock market rules. Alongside the enquiry into the Adani Group, SEBI sent a “show cause” notice to Hindenburg Research, alleging that the short-seller violated the country’s rules by setting up a short-bet using non-public information.
Conflict of interest?
Hindenburg’s report suggests that SEBI’s alleged lenient action against the Adani Group’s suspicious offshore shareholders may stem from Buch’s personal financial ties to the same entities under investigation. The report also points to her role in promoting Real Estate Investment Trusts (REITs) in India, an asset class significantly benefiting Blackstone, where her husband serves as a senior advisor.
The Broader Implications
The allegations against Buch come at a time when SEBI is already facing criticism for its handling of the Adani Group investigation. If proven true, these allegations could have far-reaching implications for the credibility of India’s market regulator and its ability to enforce market rules impartially.
Conclusion
As the situation unfolds, all eyes will be on SEBI and the Indian government to see how they respond to these serious allegations. The demand for a thorough and transparent investigation is likely to grow louder, and the outcome could have significant implications for the future of market regulation in India.
The allegations by Hindenburg Research have once again put the spotlight on the Adani Group and raised questions about the integrity of India’s financial regulatory framework. Whether these allegations hold water or not, they underscore the need for greater transparency and accountability in the financial markets.
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Nikhil Malhotra 
