SEBI accuses Hindenburg of sharing Adani report early for profits
SEBI has accused Hindenburg Research of sharing an advance copy of a damaging report on the Adani Group, with New York-based hedge fund manager Mark Kingdon, two months before its publication. SEBI, in its 46-page show cause notice to Hindenburg, alleges that Hindenburg, Kingdon, and a broker linked to Kotak Mahindra Bank profited from the over $150 billion market value drop in Adani's 10 listed firms following the report's release.
Hindenburg responds to SEBI's accusations
Hindenburg says it made just $4.1 million from its declared positions on Adani stocks, and criticized SEBI for not investigating the conglomerate's alleged offshore shell entities. The short-seller described SEBI's show cause notice an attempt to "silence and intimidate those who expose corruption and fraud perpetrated by the most powerful individuals in India." The firm also claimed that the vehicle used to bet against Adani's flagship firm belonged to Kotak Mahindra (International) Ltd, Mauritius-based subsidiary of Kotak Mahindra Bank Ltd.
Notice to Hindenburg, KMIL, Kingdon, and Anderson
SEBI has sent notices to Hindenburg, Kingdon, KMIL, and Hindenburg founder Nathan Anderson. The regulator alleges that Kingdon transferred $43 million in two tranches to build short positions in Adani Enterprises Ltd (AEL) ahead of report release. The K India fund built short positions for 850,000 stocks and squared off these positions soon after the report was released. SEBI's notice includes extracts of time-stamped conversations between a Kingdon hedge fund employee, and KMIL traders for selling future contracts in AEL.
Impact of Hindenburg's report on Adani Group
Following the release of Hindenburg's report titled Adani Group: How the World's 3rd Richest Man is Pulling The Largest Con in Corporate History on January 24, 2023, the price of AEL fell by 59% — from ₹3,422 to ₹1,404.85 per share. This led to a significant drop in the market value of Adani Group's listed firms. SEBI alleges that this was due to "panic selling" induced by "non-public" and "misleading" information shared by Hindenburg.
Allegations of Chinese links to Kingdon
Senior lawyer Mahesh Jethmalani has alleged that Mark Kingdon has Chinese links, and commissioned the Hindenburg report which led to shares of Adani Group companies taking a hit. He claimed that Kingdon's wife Anla Cheng, a Chinese-American with a large shareholding in the Kingdon Master Fund, is a lobbyist for Chinese interests in the United States. These allegations add another layer of complexity to the ongoing investigation into Hindenburg's report on Adani Group.
