SEBI chair, her husband had stakes in offshore funds used in Adani scandal: Hindenburg

Around 18 months after its adverse report on Adani Group, U.S.-based short-seller Hindenburg Research has released another report, alleging Securities and Exchange Board of India (SEBI) Chairperson Madhabi Puri Buch and her husband Dhaval Buch of having stakes in "obscure offshore funds used in the Adani money siphoning scandal".

The SEBI chairperson and her husband, in a joint statement, termed these allegations "baseless" and called it "character assassination", while saying all the necessary disclosures have been provided to SEBI. She also hinted at her willingness to provide any document required on the matter, even from the time before she entered public life.

Hindenburg's report released on Saturday alleges that despite the evidence, along with over 40 independent media investigations in the case, Indian securities regulator had taken "no public action" against the Adani Group.

"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," says Hindenburg in its report titled "Whistleblower Documents Reveal SEBI’s Chairperson Had Stake In Obscure Offshore Entities Used In Adani Money Siphoning Scandal".

Linking Adani’s relationship with the SEBI Chairperson, the report says she and her husband had hidden stakes in the "same obscure offshore Bermuda and Mauritius funds", found in the same complex nested structure, used by Vinod Adani.

Citing whistleblower documents, the short seller says they opened account with IPE Plus Fund 1 on June 5, 2015, in Singapore. "IPE Plus Fund” is a small offshore Mauritius fund set up by an Adani director through India Infoline (IIFL), a wealth management firm with ties to the Wirecard scandal," says the report. "A declaration of funds, signed by a principal at IIFL states that the source of the investment is “salary” and the couple´s net worth is estimated at $10 million."

The report also alleges that "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 the Adani group".

Raising questions over SEBI's investigation into the Adani case, Hindenburg says if the regulator wanted to find the offshore fund holders, perhaps she could have "started by looking in the mirror". "We find it unsurprising that SEBI was reluctant to follow a trail that may have led to its chairperson."

Alleging a conflict of interest, Hindenburg says that during Buch's tenure as a full-time member at SEBI, her husband was appointed a senior adviser to U.S.-based investment major Blackstone in 2019. "He had not worked for a fund, in real estate or capital markets before, per his LinkedIn profile."

Blackstone has been one of the largest investors and sponsors of REITS, a new asset class in the country. "During Dhaval Buch's time as a senior advisor, while his wife was a SEBI official, Blackstone sponsored Mindspace and Nexus Select Trust, India's second and fourth REIT to review SEBI approval to publicly IPO," says the Hindenburg report.

It also alleges that during Dhaval Buch’s time as an advisor to Blackstone, SEBI has "proposed, approved and facilitated major REIT regulations changes". "These include 7 consultation papers, 3 consolidated updates, 2 new regulatory frameworks and nomination rights for units, specifically benefiting private equity firms like Blackstone."

Among other allegations, the report says during conferences, the SEBI Chairperson has touted REITs as her “Favourite Products For The Future” and urged investors to look “Positively” upon the asset Class. "While making those statements, she omitted to mention that Blackstone, who her husband advises, stands to gain significantly from the asset class."

The short seller says "SEBI can't be trusted as an objective arbiter In the Adani matter."

SEBI on June 27, 2024, had sent a ‘show cause’ notice to Hindenburg for its earlier 106-page report, and said the disclosure around its short position was "deficient". Hindenburg retorted saying the SEBI notice was a "nonsense" and "concocted".

Notably, the capital markets regulator is still probing the Adani group in the Hindenburg case. The Supreme Court in January 2024 had refused to transfer the probe being carried out by SEBI to a separate special investigation team (SIT), saying the "power of this court to enter the regulatory framework of SEBI is limited". The SC also said there was no "ground" to transfer the case from SEBI to an SIT.