Hindenburg Claims SEBI Chair Involved in Adani Offshore Fund Scandal

US short-seller Hindenburg Research has accused SEBI Chairperson Madhabi Buch and her husband of having stakes in offshore funds linked to the Adani money siphoning scandal. In a blog post, Hindenburg claimed that despite 18 months since its report on Adani, SEBI has shown little interest in investigating Adani's alleged web of Mauritius and offshore shell entities.

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Hindenburg cited whistleblower documents alleging that Madhabi Buch and her husband had stakes in obscure offshore funds used in the Adani scandal. These funds, allegedly controlled by Vinod Adani, were said to be used for round-tripping funds and inflating stock prices. "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 USD 10 million," Hindenburg stated.

SEBI's Investigation and Supreme Court Involvement

Following the Hindenburg report, the Supreme Court asked SEBI to complete its investigation and set up an expert panel to look into regulatory lapses. The panel did not find any adverse reports on Adani, and the apex court stated that no other probe was required apart from SEBI's ongoing investigation. SEBI had been investigating the Adani group even before the Hindenburg report, focusing on 13 opaque offshore entities holding significant stakes in five publicly traded stocks of the conglomerate.

Hindenburg further alleged that Madhabi Buch and her husband had hidden stakes in the same offshore Bermuda and Mauritius funds used by Vinod Adani. On March 22nd, 2017, just weeks before Madhabi Buch's appointment as SEBI chairperson, Dhaval Buch wrote to Mauritius fund administrator Trident Trust regarding their investment in the Global Dynamic Opportunities Fund (GDOF). He requested to be the sole person authorised to operate the accounts, seemingly moving assets out of his wife's name ahead of her politically sensitive appointment.

Allegations Against Vinod Adani

Vinod Adani, brother of Gautam Adani, allegedly used these offshore structures to invest in Indian markets with funds siphoned from over-invoicing power equipment to Adani Group. According to Hindenburg, these investments date back to 2015, well before Madhabi Buch's appointment as a whole-time member of SEBI in 2017 and her elevation to chairperson in March 2022.

In January last year, Hindenburg accused Adani Group of pulling off the largest con in corporate history by using a web of companies in tax havens to inflate revenue and manipulate stock prices while accumulating debt. Although the conglomerate denied all allegations, the report caused a significant drop in shares, wiping out over USD 150 billion in market value at their lowest point. Most of these losses have since been recouped by the listed companies.

Hindenburg criticised SEBI for its reluctance to follow a trail that might lead to its own chairperson. "If SEBI really wanted to find the offshore fund holders, perhaps the SEBI chairperson could have started by looking in the mirror," it said. The Supreme Court order recorded that SEBI had drawn a blank in its investigations into who funded Adani's offshore shareholders.

Details of Offshore Investments

Documents revealed that Madhabi Buch and her husband had stakes in a multi-layered offshore fund structure with minimal assets traversing high-risk jurisdictions. This structure was overseen by a company with ties to the Wirecard scandal and significantly used by Vinod Adani. An account statement dated February 26th, 2018, addressed to Madhabi Buch's private email, detailed their investment in GDOF Cell 90 IPEplus Fund 1.

The couple may have first opened their account with IPE Plus Fund 1 on June 5th, 2015, in Singapore. This small offshore Mauritius fund was set up by an Adani director through India Infoline (IIFL), a wealth management firm linked to the Wirecard embezzlement scandal. No immediate comments were available from SEBI regarding these allegations.

The allegations against Madhabi Buch and her husband raise serious questions about potential conflicts of interest within SEBI. The involvement of high-ranking officials in such complex financial structures could undermine public trust in regulatory bodies tasked with ensuring market integrity.