Hindenburg Research flags SEBI Chairperson’s stake in obscure offshore funds used in Adani scandal

The high-stakes battle between Hindenburg Research and the Adani Group has taken a dramatic turn, with the US-based short-seller now levelling explosive allegations against key personnel of India’s market regulator, the Securities and Exchange Board of India (SEBI).

In a scathing report, Hindenburg claims that SEBI Chairperson Madhabi Puri Buch and her husband Dhaval Buch had a stake in the same obscure offshore entities that were allegedly used in the Adani money siphoning scandal. This bombshell revelation has sent shockwaves through the Indian financial landscape, raising serious questions about the independence and integrity of the country’s premier market watchdog.

The Hindenburg allegations

According to the Hindenburg report, the SEBI Chairperson and her spouse appear to have had a hidden stake in the very same Mauritius and Bermuda-based offshore funds that were allegedly used by Vinod Adani, the elder brother of Gautam Adani, to manipulate the Adani Group’s stock prices. Hindenburg claims to have obtained whistleblower documents that reveal the Buchs’ involvement in these shadowy offshore entities.

The report alleged that, “In brief, despite the existence of thousands of mainstream, reputable onshore Indian mutual fund products, an industry she now is responsible for regulating, documents show SEBI Chairperson Madhabi Buch and her husband had stakes in a multi-layered offshore fund structure with miniscule assets, traversing known high-risk jurisdictions, overseen by a company with reported ties to the Wirecard scandal, in the same entity run by an Adani director and significantly used by Vinod Adani in the alleged Adani cash siphoning scandal”.

Dhaval Buch’s suspicious moves

The Hindenburg report alleges that in the weeks leading up to Madhabi Puri Buch’s appointment as a SEBI Whole-time Member in 2017, her husband Dhaval Buch wrote to the Mauritius fund administrator of the Global Dynamic Opportunities Fund (GDOF), requesting to be the sole authorized operator of their joint account. This move, according to Hindenburg, appears to have been an attempt to transfer the assets out of his wife’s name before her high-profile appointment.

The offshore entities connection

Hindenburg further claims that in a 2018 account statement addressed to Madhabi Buch’s private email, the full details of the structure were revealed: “GDOF Cell 90 (IPEplus Fund 1).” This, the firm alleges, is the exact same Mauritius-registered “cell” of the fund that was reportedly used by Vinod Adani in the Adani money siphoning scandal.

SEBI’s investigation drew “a blank”

The Hindenburg report also highlights the Supreme Court’s observation that SEBI had “drawn a blank” in its investigation into who funded Adani’s offshore shareholders. “If SEBI really wanted to find the offshore fund holders, perhaps the SEBI Chairperson could have started by looking in the mirror,” the report quips, suggesting that SEBI’s reluctance to delve deeper may have been due to the alleged involvement of its own Chairperson.

Agora Partners and Agora Advisory

Hindenburg’s allegations extend beyond the Adani offshore entities, also implicating the SEBI Chairperson’s involvement in an offshore Singaporean consulting firm called Agora Partners. The report claims that from April 2017 to March 2022, while Madhabi Buch was a Whole-time Member and Chairperson at SEBI, she had a 100% interest in this offshore entity. Interestingly, two weeks after her appointment as SEBI Chairperson, she allegedly transferred the shares to her husband.

Blackstone connection amid REIT regulations

The Hindenburg report also highlights the potential conflict of interest arising from Dhaval Buch’s role as a senior advisor at Blackstone, a major investor in India’s real estate investment trusts (REITs). The report alleges that during Dhaval Buch’s tenure, significant changes to REIT regulations were proposed, approved, and facilitated by SEBI, potentially benefiting Blackstone’s interests. This major conflict of interest is one that is catching the eye.

SEBI’s response and denial

In response to the Hindenburg allegations, Madhabi Puri Buch and Dhaval Buch have issued a joint statement strongly denying the “baseless allegations and insinuations” made in the report. They have asserted that their “life and finances are an open book” and have offered to disclose any and all financial documents, including those from their time as private citizens, to any relevant authority.

Calls for resignation and thorough probe

The Hindenburg report has sparked outrage and calls for action from various political quarters. The Trinamool Congress has demanded the immediate suspension of the SEBI Chairperson, pending a Supreme Court-monitored investigation, while the Congress party has reiterated its call for a joint parliamentary committee to probe the “Adani mega scam” while calling for an immediate end to such conflicts of interest in the the regulator’s investigation of the Adani Group.

Ongoing investigations, regulatory scrutiny, and future implications

As the fallout from the Hindenburg report continues to reverberate, the spotlight remains firmly on SEBI and its ability to conduct impartial and thorough investigations. The market regulator’s credibility has been called into question, and its handling of the Adani-Hindenburg saga will be closely watched by investors, policymakers, and the public at large.

The allegations against the SEBI Chairperson have the potential to further erode investor confidence in India’s financial markets. If proven true, the revelations could undermine the trust that the public and international investors have placed in the country’s regulatory framework, potentially impacting the flow of capital and the overall investment climate.

As the dust settles, the Indian government and SEBI will need to address these allegations head-on, ensuring that the market regulator’s independence and integrity are beyond reproach. Restoring public faith in the system will be crucial, calling for a delicate balance of transparency, accountability, and decisive action. This will be vital to safeguarding the integrity of India’s capital markets and the public’s trust in its regulatory institutions. And perhaps even more importantly, maintain India’s status as a preferred investment destination in the global financial landscape.