Whistleblower docs implicate SEBI chief Madhabi Buch in Adani scandal: Hindenburg

US-based investment research firm Hindenburg Research, in a statement on Saturday (August 10), said whistleblower documents have implicated SEBI’s Chairperson, Madhabi Puri Buch, in the Adani money siphoning scandal.

According to the documents, Buch allegedly held a stake in obscure offshore entities used in the scandal. Hindenburg, a US-based short seller known for its exposé on the Adani Group, had earlier hinted at a significant new disclosure related to India.

No meaningful action

Nearly 18 months after its original report accused the Adani Group of orchestrating "the largest con in corporate history," Hindenburg asserted that SEBI has yet to take any meaningful public action against the conglomerate, despite extensive evidence and over 40 independent media investigations corroborating their findings.

The report detailed the use of offshore shell entities, primarily based in Mauritius, to conduct billions of dollars in undisclosed related party transactions and stock manipulation.

Despite these revelations, SEBI's response has been lacklustre, and the regulator is reportedly preparing to impose only minor penalties on the Adani Group for technical violations.

Show cause notice to Hindenburg

In contrast, SEBI issued a 'show cause' notice to Hindenburg on June 27, 2024, not for inaccuracies in its report but for allegedly inadequate disclosure regarding their short position, which Hindenburg had repeatedly disclosed.

The SEBI notice also criticised Hindenburg's report for being "reckless," particularly for quoting a banned broker who claimed that SEBI was aware of Adani's use of complex offshore entities to circumvent regulations and even participated in these schemes.

Hindenburg's July 2024 response expressed concern that SEBI, a regulator tasked with preventing fraudulent practices, appeared uninterested in pursuing the parties involved in operating a secret offshore empire.

Supreme Court observation

The Supreme Court has noted SEBI's failure to uncover the identities of Adani’s offshore shareholders. In late June 2024, Adani’s CFO, Jugeshinder Singh, dismissed the severity of the regulatory notices against the group.

Background investigations revealed that Vinod Adani, Gautam Adani's brother, allegedly used an offshore fund structure involving entities in Bermuda and Mauritius to launder money siphoned from inflated power equipment invoices.

Further whistleblower documents indicate that Madhabi Buch and her husband, Dhaval Buch, held stakes in the same offshore funds in the Adani scandal.

The latest Hindenburg documents reveal that they opened an account with IPE Plus Fund 1 in June 2015, and Dhaval Buch later moved the assets out of his wife’s name just before her appointment as a Whole-Time Member of SEBI in April 2017.

Adani's 'total confidence'

"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. What we hadn’t realised: 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," said Hindenburg's document.

The report also questioned Buch’s conflicts of interest during her tenure at SEBI, including her ownership of a Singaporean consulting firm and her husband's advisory role at Blackstone, a major investor in India’s REIT (real estate investment trust) market.

Under Buch’s leadership, SEBI has been accused of implementing regulations that benefited Blackstone, where her husband worked as a senior advisor. The report concludes by questioning SEBI's ability to be an impartial regulator in the Adani matter, given the potential conflicts of interest involving its chairperson.