MUMBAI: US-based short-seller Hindenburg Research on Saturday alleged that SEBI Chairperson Madhabi Buch and her husband, Dhaval Buch, held hidden stakes in the same 'obscure' offshore Bermuda and Mauritius funds used by Vinod Adani, brother of billionaire Gautam Adani, in what is described as the money 'siphoning scandal'.
Hindenburg suggested that this is why India’s capital market regulator was not keen to thoroughly investigate the Adani Group.
In January 2023, Hindenburg published a critical report accusing the Adani Group of stock manipulation and accounting fraud, which led to a significant decline in the company's stock price.
The Adani Group has consistently denied these allegations, and the Supreme Court has supported its stance.
Last year, the Apex Court noted that SEBI had not achieved significant results in its investigation into the Adani matter.
"We suspect SEBI’s reluctance to take meaningful action against suspected offshore shareholders in the Adani Group may be due to Chairperson Madhabi Buch’s involvement with the same funds used by Vinod Adani," the short-seller stated in a new report released late on Saturday.
According to Hindenburg, whistleblower documents indicate that Buch and her husband first opened an account with IPE Plus Fund 1 on June 5, 2015, in Singapore.
"'IPE Plus Fund" is a small offshore Mauritius fund set up by an Adani director through India Infoline (IIFL), a listed wealth management firm with ties to the German Wirecard scandal. Vinod Adani reportedly used this structure to invest in Indian markets with funds allegedly siphoned from over-invoicing of power equipment to the Adani Group," Hindenburg said.
The report added, "If SEBI really wanted to find the offshore fund holders, perhaps the SEBI Chairperson could have started by looking in the mirror. We find it unsurprising that SEBI was reluctant to follow a trail that may have led to its own chairperson."
Notably, Buch was appointed a "whole-time member" of SEBI in April 2017.
Hindenburg’s latest report also noted that a declaration of funds, signed by a principal at IIFL, states that the source of the investment is "salary" and that the couple’s net worth is estimated at $10 million.
Hindenburg mentioned that on February 25, 2018, Buch personally wrote to India Infoline using her private Gmail account, conducting business through her husband’s name, to redeem units in the fund.
Additionally, on March 22, 2017, just weeks before Buch’s politically sensitive appointment, her husband, Dhaval, wrote to Mauritius fund administrator Trident Trust regarding their investment in the Global Dynamic Opportunities Fund (GDOF).
Hindenburg claimed this is the same Mauritius-registered "cell" of the fund found several layers deep in a convoluted structure reportedly used by Vinod Adani.
The report explained that in one complex structure, a Vinod Adani-controlled company invested in the “Global Dynamic Opportunities Fund” (GDOF) in Bermuda, a British overseas territory and tax haven, which then invested in IPE Plus Fund 1, a fund registered in Mauritius, another tax haven.
A separate investigation by a financial daily revealed that the parent fund of GDOF—the Bermuda-based Global Opportunities Fund (GOF)—was used by two Adani associates "to amass and trade large positions in shares of the Adani Group."
These nested funds are managed by IIFL.
"In brief, despite the existence of thousands of mainstream, reputable onshore Indian mutual fund products, an industry she now regulates, documents show SEBI Chairperson Madhabi Buch and her husband had stakes in a multi-layered offshore fund structure with minuscule assets, traversing known high-risk jurisdictions, overseen by a company with reported ties to the Wirecard scandal, in the same entity run by an Adani director and significantly used by Vinod Adani in the alleged Adani cash siphoning scandal," said Hindenburg.
Conflict of interest?
Hindenburg also raised concerns about potential conflicts of interest, stating that Madhabi Buch, while serving as SEBI Chairperson, maintained a 99% stake in an Indian consulting business, which reported significant revenue.
"From April 2017 to March 2022, while Madhabi Buch was a Whole Time Member and Chairperson at SEBI, she had a 100% interest in an offshore Singaporean consulting firm called Agora Partners. On March 16, 2022, two weeks after her appointment as SEBI Chairperson, she quietly transferred the shares to her husband,” Hindenburg’s report added.
The short-seller claims that Madhabi Buch currently holds a 99% stake in an Indian consulting business called Agora Advisory, where her husband is a director. In 2022, this entity reported $261,000 in revenue from consulting, 4.4 times her disclosed salary at SEBI.
Hindenburg also noted that during Madhabi Buch’s tenure as a whole-time member at SEBI, her husband was appointed as a senior advisor to Blackstone in 2019. He had not worked in funds, real estate, or capital markets before, according to his LinkedIn profile.
“Blackstone has been one of the largest investors and sponsors of REITs, a nascent asset class in India. During Dhaval Buch’s time as Senior Advisor, while his wife was a SEBI official, Blackstone sponsored Mindspace and Nexus Select Trust, India’s second and fourth REITs to receive SEBI approval for a public IPO.”
“During Dhaval Buch’s tenure as Advisor to Blackstone, SEBI proposed, approved, and facilitated major REIT regulatory changes, including seven consultation papers, three consolidated updates, two new regulatory frameworks, and nomination rights for units, specifically benefiting private equity firms like Blackstone,” the report concluded.