US-based short seller Hindenburg Research on Saturday, has alleged a connection between SEBI’s Chairperson Madhabi Puri Buch, her husband Dhaval Buch and certain offshore entities involved in the Adani money movement case.
Citing whistleblower documents, the Hindenburg report read, “We had previously noted Adani’s total confidence in continuing to operate without the risk of serious regulatory intervention, suggesting that this may be explained through Adani’s relationship with SEBI Chairperson, Madhabi Buch.”
Buch disclosed, recused in matters of potential conflicts of interest, says SEBI
“Lastly, it is emphasized that SEBI has adequate internal mechanisms for addressing issues relating to conflict of interest, which include disclosure framework and provision for recusal. It is noted that relevant disclosures required in terms of holdings of securities and their transfers have been made by the Chairperson from time to time. Chairperson has also recused herself in matters involving potential conflicts of interest,” SEBI said in the statement.
“SEBI, over the years, has built a robust regulatory framework that not only aligns with best global practices but also ensures protection of investors. SEBI remains committed to ensuring the integrity of India’s Capital markets and its orderly growth and development,” the statement further added.
SEBI says promoting REITs benefitting Blackstone is inappropriate
“The report has also stated that the implementation of the SEBI (REIT) Regulations 2014 as well as changes in such regulations had resulted in significant benefit to a large multinational financial conglomerate. In this regard, it may be noted that the SEBI (REIT) Regulations, 2014 has been amended from time to time,” SEBI said in a statement.
“As with all cases involving introduction of a new regulation or amendment to an existing regulation, a robust consultation process for seeking inputs and feedback of the industry, investors, intermediaries, relevant Advisory Committee and the public at large is in place. Only after consultation, a proposal for introduction of a new regulation or change in the existing regulation is placed for the consideration of and deliberation of the SEBI Board. Regulations are notified after approval of the SEBI Board. As a measure of transparency, the agenda papers for Board meetings and outcomes of Board discussions are also published on SEBI website. Hence, claims that such regulations, changes to regulations or circulars issued related to REITs were to favour one large multinational financial conglomerate, are inappropriate,” SEBI further added.
“For the development of the Indian securities market, SEBI has at various times underscored the potential of REITs, SM REITs, InvITs and Municipal Bonds amongst other asset classes for democratisation of markets, financialisation of household savings and for capital formation through the capital markets. These are also highlighted in the latest SEBI Annual Report, as part of Chairperson’s Statement (see paragraphs titled ‘Financial Inclusion and Democratization of Markets’ and ‘New Avenues for Capital Formation’). Therefore, the claim that promoting REITs and SM REITs among various other asset classes by SEBI was only for benefitting one large multinational financial conglomerate, is inappropriate,” SEBI statement added.
SEBI justifies show cause notice to Hindenburg Research
“The report also seeks to question SEBI’s action in issuing a show cause notice to Hindenburg Research, on June 27, 2024. The show cause notice in question, alleging violations of securities laws by Hindenburg Research, has been issued by following the due process of the law. It is noted that Hindenburg Research has itself made the show cause notice issued to it available on its website. The show cause notice contains the reasons for its issuance. The proceedings in this matter are ongoing and the same is being dealt with in accordance with the established procedure and in compliance with the principles of natural justice,” SEBI said in the statement.
Allegations against Adani Group duly investigated say SEBI
“Notably, the allegations made by Hindenburg Research, against the Adani Group, have been duly investigated by SEBI,” SEBI said in a statement.
“Hon’ble Supreme Court in its Order of January 3, 2024 noted that SEBI had completed twenty–two out of twenty–four investigations into the Adani group. Subsequently, one more investigation was completed in March 2024, and one remaining investigation is close to completion. During the ongoing investigation in this matter, more than 100 summons, around 1,100 letters and emails have been issued to seek information. Further, more than 100 communications have been made seeking assistance from domestic/foreign regulators and external agencies. Also more than 300 documents containing around 12,000 pages have been examined,” the statement added.
“It may be noted that pursuant to the completion of investigations, SEBI initiates enforcement proceedings which are quasi–judicial in nature. This comprises issuing of show cause notice and giving of opportunity of hearing which culminates in the passing of a speaking order. Such order is then made available in the public domain. Where investigations have been completed, enforcement proceedings initiated are ongoing and appropriate actions are being taken in accordance with the applicable securities laws. SEBI, as a matter of policy, refrains from commenting on any investigation/ongoing enforcement matter,” SEBI said in the statement.
SEBI advises investors to exercise caution on Hindenburg report
“Investors should remain calm and exercise due diligence before reacting to such reports. Investors may also like to take note of the disclaimer in the report that states that readers should assume that Hindenburg Research may have short positions in the securities covered in the report,” SEBI said in a statement.
SEBI release statement on the Hindenburg Research’s Report dated August 10, 2024
Capital markets regulator Securities and Exchange Board of India (SEBI) on Sunday released their statement on Hindenburg Research report released on August 10, 2024.
“The report inter alia claims that SEBI has not taken any action against the Adani Group. It questions SEBI’s action of issuing a show cause notice to Hindenburg Research on June 27, 2024. It further claims that SEBI has made changes to the SEBI (REIT) Regulations 2014, in order to benefit a diversified multinational financial conglomerate. These issues warrant an appropriate response,” SEBI said in a statement.
AMFI issues statement in support of SEBI chief Madhabi Puri Buch
The Association of Mutual Funds of India (AMFI) has issued a statement in support of SEBI chief Madhabi Puri Buch.
“Market ecosystem must be seen for what they truly are – attempts to create sensation by connecting random events done in the past. Left unchecked, it can create unnecessary hurdles in the path of the world’s fastest-growing economy. These statements, lacking in context and understanding of our regulatory environment, seek to malign the hard-earned achievements of our nation. Such advances must be viewed as creating a hurdle in India’s endeavour to become a developed economy. Investors and partners, both domestic and international, must rest assured that India’s financial system is secure, transparent, and designed to foster growth and innovation with high integrity driven right from the top of the institution,” said the Association of Mutual Funds in India in a statement on Sunday, August 11.
Madhabi Puri Buch and Dhaval Buch issues another detailed statement
SEBI Chief Madhabi Puri Buch and her husband Dhaval Buch releases a statement in the context of allegations made by Hindenburg on 10th Aug 2024 against them.
360 One denies IPE Plus Fund 1 made investments in Adani Group from Oct 2013-2019
360 ONE Asset Management, which was earlier known as IIFL Wealth Management in its press release on August 11, said, “IPE-Plus Fund 1, a fully compliant and regulated fund, was launched in October 2013 and operated until October 2019, says 360 One. Throughout the fund’s tenure, IPE-Plus Fund 1 made zero investments in any shares of the Adani Group either directly or indirectly through any fund.”
“At its peak, the fund’s Assets Under Management (AUM) reached approximately $48 million, with over 90% of the fund consistently invested in bonds. The fund was managed as a discretionary fund by the Investment Manager. No investor had any involvement in the fund’s operations or investment decisions. Madhabi Buch & Dhaval Buch’s holdings in the fund were less than 1.5% of the total inflow into the fund,” the press release added.
“All other points mentioned in the report are repetitive and have been adequately clarified in previous communications. 360 ONE Asset Management reaffirms that all its funds are fully compliant with all applicable regulations, and we adhere to the highest standards of corporate governance,” the statement said.
Adani Group releases statement dismissing the latest allegations from Hindenburg Research
“The latest allegations by Hindenburg are malicious, mischievous and manipulative selections of publicly available information to arrive at pre-determined conclusions for personal profiteering with wanton disregard for facts and the law. We completely reject these allegations against the Adani Group which are a recycling of discredited claims that have been thoroughly investigated, proven to be baseless and already dismissed by the Hon’ble Supreme Court in January 2024. It is reiterated that our overseas holding structure is fully transparent, with all relevant details disclosed regularly in numerous public documents. Furthermore, Anil Ahuja was a nominee director of 3i investment fund in Adani Power (2007-2008) and, later, a director of Adani Enterprises until 2017. The Adani Group has absolutely no commercial relationship with the individuals or matters mentioned in this calculated deliberate effort to malign our standing. We remain steadfastly committed to transparency and compliance with all legal and regulatory requirements. 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,” Adani Group said.
Hindenburg Research report alleges conflicts of interest involving SEBI Chairperson Madhabi Puri Buch and her husband, Dhaval
“During Madhabi Buch’s tenure as a whole time member at SEBI, her husband was appointed as a Senior Advisor to Blackstone, a global private equity firm and large investor in India in 2019. He had not worked for a fund, in real estate or capital markets before, per his LinkedIn profile,” Hindenburg Report read.
“Blackstone has been one of the largest investors and sponsors of REITS, a Nascent Asset Class in India. During Dhaval Buch’s time as Senior Advisor, while his wife was a SEBI official, Blackstone sponsored Mindspace and Nexus Select Trust, India’s second and fourth REIT to receive SEBI approval to publicly IPO,” the report further added.
“During Dhaval Buch’s time as 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,” Hindenburg report said.
“During industry conferences, SEBI Chairperson Madhabi Buch 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,” Hindenburg Research report further said.
Madhabi Buch’s consulting firm earned 4.4 times her disclosed salary at SEBI
“Madhabi Buch currently has a 99% stake in an Indian consulting business called Agora Advisory, where her husband is a director,” Hindenburg Report read.
“In 2022, this entity reported $261,000 (INR 19.8 million) revenue from consulting, 4.4 times her disclosed salary at SEBI,” Hindenburg Report further added.
Madhabi and Dhaval Buch alleged of financial opacity
“From April 2017 to March 2022, while Madhabi Buch was a whole time Member and Chairperson at SEBI, she had a 100% interest in an offshore Singaporean Consulting Firm, called Agora Partners,” the report said.
“On March 16th, 2022, two weeks after her appointment as SEBI Chairperson, she quietly transferred the shares to her husband,” the report further added.
Hindenburg alleges SEBI has taken no action against Adani shareholders
“To date, Sebi has taken no action against other suspect adani shareholders operated by India infoline: EM resurgent fund and emerging India focus funds. In our original report, we identified, among other funds, two Mauritius entities called EM Resurgent Fund and Emerging India Focus Funds. Both entities were disclosed as related parties of India Infoline (now called 360 One) and overseen by its employees, per its annual reports,” Hindenburg Report said.
“We noted that “the trading patterns [of these funds] suggest that the stock parking entities and the suspicious offshore entities may have artificially inflated the volume and/or price of some Adani listed companies,” said Hindenburg.
Hindenburg Research reports says SEBI failed to find ‘Who Funded Adani’s Offshore Shareholders’
Hindenburg said in its report, “The Supreme Court said that SEBI had “drawn a blank” in its investigations 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. We find it unsurprising that Sebi was reluctant to follow a trail that may have led to its own chairperson.”
“In response to requests from the Indian Supreme Court to investigate the Adani matter, SEBI was said to have a hit a wall unveiling the holders of the offshore funds. The Supreme Court said that while SEBI seemingly agreed with our concerns over who funded Adani’s offshore shareholders, “it is evident that SEBI has drawn a blank in this investigation”,” Hindenburg Report read.
“We suspect SEBI’s unwillingness to take meaningful action against suspect offshore shareholders in the Adani Group may stem from Chairperson Madhabi Buch’s complicity in using the exact same funds used by Vinod Adani, brother of Gautam Adani,” Hindenburg Report further added.
SBI Chairperson Madhabi Puri Buch, Dhaval Buch denies allegations
“In the context of allegations made in the Hindenburg Report dated August 10,2024 against us, we would like to state that we strongly deny the baseless allegations and insinuations made in the report. The same are devoid of any truth. Our life and finances are an open book. All disclosures as required have already been furnished to SEBI over the years. We 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,” reads a press statement by SEBI chairperson Madhabi Puri Buch and her husband Dhaval Buch.
“Further, in the interest of complete transparency, we would be issuing a detailed statement in due course. It is unfortunate that Hindenburg Research against whom SEBI has taken an Enforcement action and issued a show cause notice has chosen to attempt character assassination in response to the same,” the joint statement further added.
SEBI’s X account locked after Hindenburg Research report
Shortly after Hindenburg Research released a report alleging the involvement of SEBI Chief Madhabi Puri Buch and her husband Dhaval Buch in the Adani scandal, SEBI’s official X account was locked.
When users visit the Indian market regulator’s account on X, formerly known as Twitter, they see that the account is locked, and none of the posts are visible to the public. Instead, a message stating “these posts are protected” appears, with the additional note, “Only approved followers can see @SEBI_India’s posts. To request access, click Follow.”
Total value of Buch’s stake in IPEplus Fund 1 was worth $872,762.25 in 2018
“In a later account statement dated February 26th, 2018, addressed to Madhabi Buch’s private email, the full details of the structure are revealed: “GDOF Cell 90 (IPEplus Fund 1)”. Again, this is the exact same Mauritius-registered “cell” of the fund, found several layers deep in a convoluted structure, reportedly used by Vinod Adani,” Hindenburg Report read.
“The total value of Buch’s stake was worth U.S. $872,762.25 at the time,” Hindenburg Report further added.
IPL Plus Fund allegedly links Adani and SEBI Chairperson, Madhabi Buch
Hindenburg said in its report, “Madhabi Buch and her husband Dhaval Buch first appear to have opened their account with IPE Plus Fund 1 on June 5th, 2015 in Singapore, per whistleblower documents.”
“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. Madhabi Buch was appointed a “Whole Time Member” of SEBI in April 2017, according to her LinkedIn profile,” Hindenburg Report read.
“On March 22nd, 2017, just weeks ahead of that appointment, Madhabi’s husband, Dhaval Buch, wrote to Mauritius fund administrator Trident Trust, according to documents we received from a whistleblower. The email was regarding his and his wife’s investment in the Global Dynamic Opportunities Fund,” Hindenburg Report further read.
“In the letter, Dhaval Buch requested to “be the sole person authorised to operate the Accounts”, seemingly moving the assets out of his wife’s name ahead of the politically sensitive appointment,” said Hindenburg in its report.
“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,” report added.
IPE Plus fund under radar
Hindenburg added in its report, “Sitting below GDOF in the multi-layer structure (two layers below the Global Opportunities Fund), is the IPE Plus fund, a small and obscure offshore fund registered in Mauritius. The IPE Plus Fund had only U.S. $38.43 million in assets under management (AUM) at the end of December 2017, per IIFL disclosures.”
“AdaniWatch reported that “by March 2017, ATIL, a Vinod Adani company, had a total balance of $40.38 million with GDOF”. Thus, while we are unable to see the total assets of parent fund GDOF, it appears a significant portion of the assets of the funds may be comprised of Adani money,” Hindenburg Report further stated.
“Beyond being used as an alleged funnel for Vinod Adani’s money, the tiny fund had other close ties to Adani. The Founder and Chief Investment Officer (CIO) of the IPE Plus Fund was Anil Ahuja, per his biography. At the same time, Ahuja was a director of Adani Enterprises where he served three terms spanning nine years ending in June 2017, per his biography and exchange disclosures. Prior to that he was a director of Adani Power,” said Hindenburg in its report.
Hindenburg Research claims that IIFL allegedly facilitated the creation of obscure offshore fund structures
“These nested funds are managed by Indian Infoline (“IIFL”), now called 360 One per private fund data and IIFL’s marketing material,” Hindenburg Report read.
“IIFL, is a publicly listed wealth management firm in India which has a long history in setting up convoluted fund structures and with previous ties to the Wirecard scandal, Germany’s largest ever fraud case. IIFL Wealth was alleged to have committed fraud in a takeover deal involving Wirecard, using a Mauritius fund structure, per a lawsuit in UK courts,” Hindenburg Report further stated.
Hindenburg Research cited Adani Watch and Financial Times reports for Adani money movement case
“A subsequent investigation by non-profit project Adani Watch in December 2023 showed how a web of offshore entities, controlled by Gautam Adani’s brother, Vinod Adani, were recipients of funds from the alleged over-invoicing of power equipment,” Hindenburg Report read.
“In one complex structure, a Vinod Adani controlled company had invested in “Global Dynamic Opportunities Fund” (“GDOF”) in Bermuda, a British overseas territory and tax haven, which then invested in IPE Plus Fund 1, a fund registered in Mauritius, another tax haven,” Hindenburg Report further stated.
“A separate investigation by the Financial Times showed that the parent fund of GDOF – the Bermuda-based Global Opportunities Fund (“GOF”) – was used by two Adani associates “to amass and trade large positions in shares of the Adani Group,” Hindenburg Report read.
Vinod Adani, brother Of Gautam Adani used complex structure to invest in Indian markets
“As detailed in our original Adani report, documents from the Directorate of Revenue Intelligence (DRI) alleged that Adani “grossly” overvalued the import valuation of key power equipment, using offshore shell entities to siphon and launder money from the Indian public,” Hindenburg Report read.
Hindenburg Report reveals net worth of SEBI chairperson, husband in 2015
“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,” Hindenburg Report further stated.
Whistleblower documents say SEBI Chairperson Buch and her husband’s offshore accounts opened in 2015
“Madhabi Buch and her husband Dhaval Buch first appear to have opened their account with IPE Plus Fund 1 on June 5th, 2015 in Singapore, per whistleblower documents,” Hindenburg Report read.
Hindenburg claims to receive legal notice
“On June 27th, 2024, SEBI sent us an apparent ‘show cause’ notice. SEBI did not allege any factual errors in our 106-page analysis, but instead claimed the disclosure around our short position– which we disclosed repeatedly– was deficient, arguing that we should have provided even more robust disclosure,” Hindenburg Report further stated.
Hindenburg alleges SEBI is ‘questionable’ due to potential conflicts of interest and investigations into the Adani Group were ‘lenient’
The Hindenburg report read, “We had previously noted Adani’s total confidence in continuing to operate without the risk of serious regulatory intervention, suggesting that this may be explained through Adani’s relationship with SEBI Chairperson, Madhabi Buch.”
Hindenburg Research report alleges SEBI Chair Buch had stake in offshore entities linked to Adani
“The current SEBI Chairperson and her husband, Dhaval Buch, had hidden stakes in the exact same obscure offshore Bermuda and Mauritius funds, found in the same complex nested structure, used by Vinod Adani,” the Hindenburg report reads.
Hindenburg Research published new report
Hindenburg Research on August 10 said that whistleblower documents have alleged SEBI Chairperson Madhabi Buch and her husband had a stake in the obscure offshore entities used in the Adani money movement case.