Hindenburg Research Alleges SEBI Chairperson’s Offshore Ties in Adani Probe: A Call for Further Investigation

In a new wave of allegations, U.S.-based short seller Hindenburg Research has accused Madhabi Puri Buch, the chairperson of the Securities and Exchange Board of India (SEBI), and her husband, Dhaval Buch, of having financial stakes in offshore funds linked to the Adani Group. These claims come nearly 18 months after Hindenburg first brought to light accusations of stock price manipulation and financial misconduct against the Adani Group, sparking significant controversy and intense scrutiny of India’s regulatory framework.

The Allegations

Hindenburg Research’s latest report, released on August 10, 2024, alleges that the SEBI chairperson and her husband held stakes in obscure offshore entities used in what it describes as the “Adani money siphoning scandal.” The report suggests that these financial interests might have played a role in SEBI’s purported reluctance to fully investigate the Adani Group’s offshore financial activities.

According to Hindenburg, a whistleblower provided documents indicating that Madhabi Puri Buch and Dhaval Buch had stakes in funds registered in Bermuda and Mauritius, countries known for their secrecy-friendly financial systems. The report specifically points to a fund named “GDOF Cell 90 (IPEplus Fund 1)” under the Global Dynamic Opportunities Fund Ltd. (GDOF), operated by IIFL Global. An account statement dated February 26, 2018, allegedly addressed to Madhabi Puri Buch’s private email account, valued their stake in this fund at over $872,000 at the time.

Conflict of Interest?

One of the most significant claims made by Hindenburg is that just weeks before Madhabi Puri Buch was appointed as a whole-time member of SEBI in 2017, Dhaval Buch had written to a Mauritius fund administrator to make himself the sole person authorized to operate the accounts. This timing, according to Hindenburg, raises questions about the potential conflict of interest in SEBI’s dealings with the Adani Group.

The report also draws attention to an email dated February 25, 2018, allegedly sent from Madhabi Puri Buch’s private email address to India Infoline (IIFL), in which she reportedly mentioned that her husband wanted to redeem 100% of their units in GDOF. Hindenburg claims that GDOF Cell 90 is the “exact safe Mauritius-registered ‘cell’ of the fund found several layers deep in a convoluted structure, reportedly used by Vinod Adani,” the brother of Adani Group’s chairman, Gautam Adani.

SEBI’s Investigation Under Scrutiny

Hindenburg’s report also highlights the Supreme Court of India’s recent observation that SEBI had “drawn a blank” in its investigation into the Adani Group’s offshore shareholders. The short-seller argues that SEBI’s failure to trace the financial trails leading back to these offshore entities might be connected to the potential involvement of its own chairperson.

The timing of these revelations is critical, as SEBI is currently under immense pressure to provide clarity on the ownership of several offshore funds that have invested in Adani Group companies. These funds have been under investigation to determine whether they were used to manipulate the group’s stock prices artificially.

Beyond the Adani Links

Hindenburg’s report does not stop at the offshore fund allegations. It also brings to light other business interests of the Buch family that could have implications for SEBI’s regulatory decisions. For instance, the report claims that Madhabi Puri Buch had a 100% stake in an offshore Singaporean consulting firm named Agora Partners, which was registered in 2013. It wasn’t until March 2022, just before her appointment as SEBI chairperson, that she reportedly transferred her holdings to her husband.

Additionally, the report alleges that Dhaval Buch, who previously served as the chief procurement officer at Unilever, was appointed as a senior advisor at global private equity firm Blackstone. Blackstone has extensive investments in India, particularly in real estate, and sponsors several Real Estate Investment Trusts (REITs) that Madhabi Puri Buch has been a strong advocate for during her tenure at SEBI. Hindenburg argues that her promotion of REITs, which she has publicly described as her “favorite product for the future,” could be seen as a conflict of interest given Blackstone’s stake in this asset class.

Agora Advisory and Additional Concerns

The report also flags concerns regarding an Indian consulting firm called Agora Advisory, where Madhabi Puri Buch currently holds a 99% stake, and her husband serves as a director. According to Hindenburg, the firm generated approximately ₹19.8 million ($261,000) in revenue from consulting services at the end of the financial year 2022. This figure, the report notes, is 4.4 times Madhabi Puri Buch’s disclosed salary as a whole-time member of SEBI, raising further questions about the potential for regulatory capture.

The Need for Transparency

Hindenburg Research concludes its report by questioning SEBI’s ability to act as an impartial regulator in the Adani matter. It suggests that the potential conflict of interest and the undisclosed financial ties of its chairperson necessitate a deeper investigation. The report’s findings, according to Hindenburg, underscore the need for greater transparency and accountability within India’s regulatory bodies, particularly when it comes to high-profile cases involving powerful corporate entities like the Adani Group.

Despite the gravity of these allegations, neither SEBI nor Madhabi Puri Buch responded to requests for comment at the time of publishing. The silence from SEBI has only added fuel to the fire, with critics calling for an independent investigation into the claims made by Hindenburg.

Moving Ahead

As the saga surrounding the Adani Group and its alleged financial misconduct continues to unfold, the role of SEBI and its chairperson has come under increasing scrutiny. The allegations made by Hindenburg Research have the potential to shake the foundations of India’s financial regulatory framework, highlighting the importance of transparency and the need for regulators to remain beyond reproach.

The coming weeks and months are likely to see increased pressure on SEBI to address these allegations and provide clear answers to the public. For now, the Hindenburg report has ensured that the spotlight remains firmly on SEBI and its leadership, as the country watches closely to see how this story will unfold.