Hindenburg Saga 2.0: Mauritius FSC Reacts To Offshore Funds Named In Report Against SEBI Chief; Says This...

Amid the latest allegations levelled by Hindenburg Research, the Financial Services Commission (FSC) of Mauritius issued a statement on Tuesday, August 13, 2024, denying claims that the offshore funds mentioned in the Hindenburg report against the Securities and Exchange Board of India (SEBI) Chairperson, Madhabi Puri Buch, are domiciled in the island nation. The FSC further clarified that Mauritius does not allow the creation of shell companies, marking a defence of its financial regulatory framework amidst the ongoing controversy.

The statement from Mauritius' financial regulator came just three days after Hindenburg Research, a US-based short seller, published a report implicating Buch and her husband, Dhaval Buch, in dubious financial dealings involving a Mauritius-registered fund. The report, released on August 10, 2024, alleged that the Buchs opened an account in 2015 with a Singapore-based wealth management firm to invest an undisclosed amount in a fund supposedly registered in Mauritius. The fund, according to Hindenburg, was linked to the Adani Group, with the aim of inflating the conglomerate's stock prices through round-tripping funds.

The FSC's response was unequivocal. In its statement, the commission emphasized that the funds mentioned in the report-specifically, the IPE Plus Fund and IPE Plus Fund 1-are neither licensed by the FSC nor domiciled in Mauritius. This clarification aims to dismantle Hindenburg's allegations, which cast Mauritius as a "tax haven" and implied that the funds were part of a broader scheme to manipulate financial markets.

Beyond addressing the specific allegations, the FSC took the opportunity to defend the integrity of Mauritius' financial system. The commission reflected that the legislative framework in Mauritius does not permit the creation of shell companies, a key point of contention in the Hindenburg report. "Mauritius has a robust framework for global business companies," the FSC stated, noting that all global business companies licensed by the FSC must meet substance requirements on an ongoing basis as per Section 71 of the Financial Services Act.

Moreover, the FSC highlighted Mauritius' compliance with international standards, particularly those set by the Organisation for Economic Co-operation and Development (OECD). The regulator pointed out that Mauritius had been rated as fully compliant with OECD standards following a peer review by the OECD Forum on Harmful Tax Practices. "The OECD is satisfied that Mauritius has no harmful features in its tax regimes, thus recognizing Mauritius as a well-regulated, transparent, and compliant jurisdiction," the FSC added, strongly refuting the characterization of Mauritius as a tax haven.

The fallout from the Hindenburg report extended beyond Mauritius, drawing a rebuttal from SEBI Chairperson Madhabi Puri Buch and her husband. The couple issued a joint statement soon after the report's publication, categorically denying the allegations and labelling them as "baseless" and an attempt at "character assassination."

Hindenburg's report alleged that the Buchs had invested in IPE Plus Fund 1, purportedly registered in Mauritius, and the Global Dynamic Opportunities Fund, based in Bermuda. The report further claimed that a company controlled by Vinod Adani, the elder brother of billionaire Gautam Adani, had also invested in the Global Dynamic Opportunities Fund, which in turn invested in IPE Plus Fund 1. Anil Ahuja, a former director of Adani Enterprises, was named as the founder and chief investment officer of IPE Plus Fund 1, further tying the allegations to the Adani Group.

In their defence, the Buchs stressed that their financial dealings were above board and fully transparent. "Our life and finances are an open book," they stated, emphasizing that all necessary disclosures had been made to SEBI over the years.

This is not the first time Hindenburg Research has targeted the Adani Group. The latest allegations come 18 months after the short seller released a damning report in January 2023, accusing Gautam Adani of orchestrating "the largest con in corporate history." That report triggered a massive sell-off in Adani Group stocks, wiping out over $100 billion in market value and leading to a global scrutiny of the conglomerate's business practices.