In New Delhi, India's markets regulator SEBI has slapped Hindenburg Research with a show-cause notice for alleged "unfair trade practices" in its 2023 broadside against the Adani Group, a move the US firm called "nonsense" and an attempt to "silence and intimidate" those who expose corruption.
The Securities and Exchange Board of India (SEBI) in its June 26 cause notice accused Hindenburg of "deliberately sensationalizing and distorting certain facts" in the damning January 2023 report on the Adani group, as well as working with a New York hedge fund to place his bet.
Hindenburg, which posted the notice on its website, said it made just $4.1 million from its declared positions in Adani shares and criticized the regulator for not focusing its investigation on the January 2023 report that "provides evidence" that the conglomerate is creating "a vast network." of offshore shell entities" and moving billions of dollars "surreptitiously" in and out of public and private Adani entities. He said that while SEBI sought to claim jurisdiction over a US-based investor, the regulator's notice "notoriously did not mention the party that has a real link to India: Kotak Bank", which created and oversaw the offshore fund structure used by Hindenburg's fellow investor to bet against Adani. The regulator "hid the name 'Kotak' with the acronym "KMIL," he added.
KMIL refers to Kotak Mahindra Investments Ltd, the asset management company.
While KMIL stated that Hindenburg was "never" its client, SEBI's show cause notice said that Hindenburg's client, Kingdon Capital Management, had invested in KMIL's K-India Opportunities Fund, which created positions in Adani Enterprises Ltd. before the report's publication and "a complete profit." of Rs 183.24 crore (USD 22.25 million)" thereafter.Hindenburg had shared its report with Kingdon Capital before the publication, which caused the Adani group's shares to fall, wiping off more than 150 billion of dollars in market value of the 10 listed entities at their lowest point.
Adani has repeatedly denied all allegations of wrongdoing and most of his stocks have since recovered losses.
"KMIL and KIOF unequivocally state that Hindenburg has never been a client of the company or an investor in the Fund," a KMIL spokesperson said. "The Fund was never aware of Hindenburg being a partner with any of its investors. KMIL also received confirmation and representation from the Fund's investor that his investments were made as a principal and not on behalf of any other person." Hindenburg said the SEBI notice "is nonsense, concocted to serve a predetermined purpose: an attempt to silence and intimidate those who expose corruption and fraud perpetrated by India's most powerful individuals."
A show cause notice is often a precursor to formal legal action which may include the imposition of financial penalties and a ban from participating in the Indian capital market.
SEBI has given Hindenburg 21 days to respond to the allegations against him. In its 46-page notice, SEBI alleged that a relationship between Hindenburg and Kingdon began in the fall of 2022, months before the damning report was published. Kingdon created positions in Adani shares to profit from his decline when the report was published.
Hindenburg said he made about $4.1 million in gross proceeds through profits related to Adani's short positions from "an investor relationship," as well as $31,000 through his own "small" short of the US bonds of the group.
He did not name the investor. After expenses related to the two-year investigation into Adani, "we are able to break even on our Adani Short," Hindenburg said.
After the Hindenburg report, the Supreme Court asked SEBI to complete its probe and set up a separate panel of experts to probe the regulatory lapses. The panel did not provide any adverse report on Adani and the top court also stated that no investigation other than the one conducted by SEBI was required.
"After a year and a half of investigation, SEBI did not identify any factual inaccuracies in our Adani investigation. Instead, the regulator took issue with things like our use of the word 'scandal' when describing multiple previous cases of accused Adani promoters. "of fraud by Indian regulators. and our quote from an individual who alleged that SEBI is corrupt and works 'hand in hand' with conglomerates like Adani to help it circumvent regulations," he said. The US firm said the notice The cause of the show resolves some questions: "Did Hindenburg work with dozens of firms to short Adani, making hundreds of millions of dollars? No, we had an investment partner, and net of costs, we can barely get by." breakeven point in our Adani short.
"Our work at Adani was never justifiable from a financial or personal safety perspective, but it is by far the work we are most proud of," he said.
Hindenburg said he first received an email from SEBI and then a show cause notice outlining alleged violations of Indian regulations. "To this day, Adani has still not addressed the allegations in our report, but has instead provided a response that ignored every key issue we raised and has offered blanket denials of subsequent media allegations," he said, adding that his January 2023 report had "provided evidence of a vast network of offshore shell entities controlled by (President of the group) Gautam Adani, Vinod Adani, and close associates.
"We detailed how billions were surreptitiously moved through these entities, in and out of public and private Adani entities, often without disclosures from related parties," he said.
In SEBI's notice, it said: "Much of the notice seemed designed to imply that our legal and disclosed investment position was secret or insidious, or to make novel legal arguments claiming jurisdiction over us. Please note that we are a company US-based research firm with no Indian entities, employees, consultants or operations." The regulator, it said, claimed that the report's disclaimers were misleading because the firm was "indirectly participating in the Indian stock market." .
"This was not a mystery, virtually everyone on earth knew that we were missing Adani because we revealed it prominently and repeatedly," he said.
"We suspect that SEBI's failure to mention Kotak or any other member of Kotak's board of directors may be aimed at shielding another powerful Indian businessman from the prospect of scrutiny, a role that SEBI appears to adopt," Hindenburg said. .
The Securities and Exchange Board of India (SEBI) in its June 26 cause notice accused Hindenburg of "deliberately sensationalizing and distorting certain facts" in the damning January 2023 report on the Adani group, as well as working with a New York hedge fund to place his bet.
Hindenburg, which posted the notice on its website, said it made just $4.1 million from its declared positions in Adani shares and criticized the regulator for not focusing its investigation on the January 2023 report that "provides evidence" that the conglomerate is creating "a vast network." of offshore shell entities" and moving billions of dollars "surreptitiously" in and out of public and private Adani entities. He said that while SEBI sought to claim jurisdiction over a US-based investor, the regulator's notice "notoriously did not mention the party that has a real link to India: Kotak Bank", which created and oversaw the offshore fund structure used by Hindenburg's fellow investor to bet against Adani. The regulator "hid the name 'Kotak' with the acronym "KMIL," he added.
KMIL refers to Kotak Mahindra Investments Ltd, the asset management company.
While KMIL stated that Hindenburg was "never" its client, SEBI's show cause notice said that Hindenburg's client, Kingdon Capital Management, had invested in KMIL's K-India Opportunities Fund, which created positions in Adani Enterprises Ltd. before the report's publication and "a complete profit." of Rs 183.24 crore (USD 22.25 million)" thereafter.Hindenburg had shared its report with Kingdon Capital before the publication, which caused the Adani group's shares to fall, wiping off more than 150 billion of dollars in market value of the 10 listed entities at their lowest point.
Adani has repeatedly denied all allegations of wrongdoing and most of his stocks have since recovered losses.
"KMIL and KIOF unequivocally state that Hindenburg has never been a client of the company or an investor in the Fund," a KMIL spokesperson said. "The Fund was never aware of Hindenburg being a partner with any of its investors. KMIL also received confirmation and representation from the Fund's investor that his investments were made as a principal and not on behalf of any other person." Hindenburg said the SEBI notice "is nonsense, concocted to serve a predetermined purpose: an attempt to silence and intimidate those who expose corruption and fraud perpetrated by India's most powerful individuals."
A show cause notice is often a precursor to formal legal action which may include the imposition of financial penalties and a ban from participating in the Indian capital market.
SEBI has given Hindenburg 21 days to respond to the allegations against him. In its 46-page notice, SEBI alleged that a relationship between Hindenburg and Kingdon began in the fall of 2022, months before the damning report was published. Kingdon created positions in Adani shares to profit from his decline when the report was published.
Hindenburg said he made about $4.1 million in gross proceeds through profits related to Adani's short positions from "an investor relationship," as well as $31,000 through his own "small" short of the US bonds of the group.
He did not name the investor. After expenses related to the two-year investigation into Adani, "we are able to break even on our Adani Short," Hindenburg said.
After the Hindenburg report, the Supreme Court asked SEBI to complete its probe and set up a separate panel of experts to probe the regulatory lapses. The panel did not provide any adverse report on Adani and the top court also stated that no investigation other than the one conducted by SEBI was required.
"After a year and a half of investigation, SEBI did not identify any factual inaccuracies in our Adani investigation. Instead, the regulator took issue with things like our use of the word 'scandal' when describing multiple previous cases of accused Adani promoters. "of fraud by Indian regulators. and our quote from an individual who alleged that SEBI is corrupt and works 'hand in hand' with conglomerates like Adani to help it circumvent regulations," he said. The US firm said the notice The cause of the show resolves some questions: "Did Hindenburg work with dozens of firms to short Adani, making hundreds of millions of dollars? No, we had an investment partner, and net of costs, we can barely get by." breakeven point in our Adani short.
"Our work at Adani was never justifiable from a financial or personal safety perspective, but it is by far the work we are most proud of," he said.
Hindenburg said he first received an email from SEBI and then a show cause notice outlining alleged violations of Indian regulations. "To this day, Adani has still not addressed the allegations in our report, but has instead provided a response that ignored every key issue we raised and has offered blanket denials of subsequent media allegations," he said, adding that his January 2023 report had "provided evidence of a vast network of offshore shell entities controlled by (President of the group) Gautam Adani, Vinod Adani, and close associates.
"We detailed how billions were surreptitiously moved through these entities, in and out of public and private Adani entities, often without disclosures from related parties," he said.
In SEBI's notice, it said: "Much of the notice seemed designed to imply that our legal and disclosed investment position was secret or insidious, or to make novel legal arguments claiming jurisdiction over us. Please note that we are a company US-based research firm with no Indian entities, employees, consultants or operations." The regulator, it said, claimed that the report's disclaimers were misleading because the firm was "indirectly participating in the Indian stock market." .
"This was not a mystery, virtually everyone on earth knew that we were missing Adani because we revealed it prominently and repeatedly," he said.
"We suspect that SEBI's failure to mention Kotak or any other member of Kotak's board of directors may be aimed at shielding another powerful Indian businessman from the prospect of scrutiny, a role that SEBI appears to adopt," Hindenburg said. .
