Seven months after US short-seller Hindenburg Research triggered a major controversy with its report on Adani Group, a global network of investigative journalists claims to have found a money trail that proves that entities linked to the Adani group invested “hundreds of millions” of dollars and netted “hundreds of millions” in profits by manipulating the group's stocks.
The investigative reporters, going under the name of Organised Crime and Corruption Reporting Project (OCCRP), claim to have done what India's market regulator and Supreme Court's expert committees failed to do -- unearth paper trails on two out of the 13 foreign entities investigated by SEBI three years ago.
“SEBI had suspected for years that some of [the Adani Group’s] public shareholders are not truly public shareholders and they could be fronts for [Adani Group] promoters.
"In 2020, it launched an investigation into 13 overseas entities holding Adani stock. But the investigation hit a wall because SEBI investigators could not conclusively determine who was behind the money,” OCCRP said, adding that even the Supreme Court's expert committee had concluded that investigating these entities would be a 'journey without a destination' because of the complex web of shell companies.
However, OCCRP said, it has unearthed documents that "reveal the destination" in case of two Mauritius-based investment funds, out of the 13 suspect entities taken up by the SEBI and the Supreme Court committee.
“From the outside, these funds, called Emerging India Focus Fund (EIFF) and EM Resurgent Fund (EMRF), appear to be typical offshore investment vehicles, operated on behalf of a number of wealthy investors,” it noted.
However, the reporter network claimed, it was able to ‘pierce the corporate veil’ and find out who were behind these funds -- Nasser Ali Shaban Ahli and Chang Chung-Ling. The two individuals have known links to the Adani group, and have been named in Government of India’s investigations into the Adani group in 2007 and 2014, pointed out OCCRP.
“Documents obtained by reporters show that a large percentage of the money was placed into these funds by two foreign investors — Chang from Taiwan and Ahli from the United Arab Emirates — who used them to trade large amounts of shares in four Adani companies between 2013 and 2018,” it said.
At one point – in March 2017 – the two funds held shares in Adani Power, Adani Enterprises, Adani Ports, and Adani Transmissions worth $430 million (around Rs 3,550 crore in today’s terms). They held stakes ranging from 8% to nearly 14% in these companies' free-floating shares in June 2016, it said.
The reporters said the money into these funds was routed through a complicated chain of entities.
“The money followed a convoluted trail, making it exceedingly difficult to follow. It was channeled through four companies and a Bermuda-based investment fund called the Global Opportunities Fund (GOF),” OCCRP said.
Between the two funds, they said, the trading of these stocks resulted in enormous profits as the funds were able to time their investments well – buying when the stock was down and selling before it fell again.
“According to documents obtained by reporters, these investments resulted in significant profits, netting hundreds of millions over the years as EIFF and EMRF repeatedly bought Adani stock low and sold it high."
The money trail - Chang and Ahli
Both Nasser Ali Shaban Ahli and Chang Chung-Ling have Adani connections that have been widely reported over the years, OCCRP pointed out. “The men were linked to the family in two separate government investigations into alleged wrongdoing by the Adani Group. Both cases were eventually dismissed.
“The first case involved a 2007 investigation into an allegedly illegal diamond trading scheme by the Directorate of Revenue Intelligence (DRI), India’s premier investigative agency under the Ministry of Finance. A DRI report described Chang as the director of three Adani companies involved in the scheme, while Ahli represented a trading firm that was also involved. As part of the case, it was revealed that Chang shared a Singapore residential address with Vinod Adani, the low-profile older brother of the Adani Group’s chairman, Gautam Adani.
“The second case was an alleged over-invoicing scam revealed in a separate 2014 DRI investigation. The agency claimed that Adani Group companies were illegally funneling money out of India by overpaying their own foreign subsidiary by as much as $1 billion for imported power generation equipment. Here, too, Chang and Ahli’s names appeared.
“At separate times, the two men were directors of two companies later owned by Vinod Adani that handled the proceeds from the scheme, one in the UAE and one in Mauritius,” the latest report by OCCRP said.
While it would be one thing for two ‘acquaintances’ of Adani promoters to trade in Adani group shares and make extremely lucrative profits, it would be very different if it could be proven that they did so on the basis of insider information. On this, OCCRP said it has “evidence that Chang and Ahli’s trading in Adani stock was coordinated with the family.”
“According to a source familiar with the Adani Group’s business who cannot be named to ensure their safety, the fund managers in charge of Chang and Ahli’s investments in EIFF and EMRF received direct instructions on the investments from an Adani company.
“The company that the source named, Excel Investment and Advisory Services Limited, is based in a secretive offshore zone in the United Arab Emirates where corporate records are not available,” the network said. However, said OCCRP, here too, it was able to get some evidence.
“Documents obtained by reporters corroborate the source’s account: An agreement for Excel to provide advisory services to EIFF and EMRF was signed for Excel by Vinod Adani himself in 2011.
“As recently as 2015, Excel was owned by a company called Assent Trade & Investment Pvt Ltd., which a 2016 email stated was ultimately owned by Vinod Adani and his wife,” it noted, adding that current corporate records from Mauritius do not show who owns the company, but do show that Vinod Adani is on its board of directors.
Citing invoices and transaction records, OCCRP said the companies that manage EIFF, EMRF, and the Bermuda-based GOF paid over $1.4 million in “advisory” fees to Excel between June 2012 and August 2014.
It also said it stumbled upon internal emails that allegedly expressed worries about justifying these payments to Excel.
“An internal email exchange suggests that, in connection with an upcoming audit, fund managers were concerned that they didn’t have sufficient paperwork to justify following Excel’s investment advice.
“In one of the emails, a manager instructs several employees to produce records that would justify the reasoning behind the investments.
“In another, a manager makes a request to obtain a report from Excel which should recommend investing in ‘more than the number of securities into which the fund has [actually] invested so that it can be demonstrated that the [investment manager] used their discretion to make the selection of investments.’” the report said.
Adani Group denies
Adani Group blamed a group funded by “Soros” – George Soros, the legendary investor who is credited with bringing the Bank of England to its knees in 1992 – for the allegations.
“These news reports appear to be yet another concerted bid by Soros-funded interests supported by a section of the foreign media to revive the meritless Hindenburg report. In fact, this was anticipated, as was reported by the media last week,” it said in a statement.
The group said such reports are aimed at, inter alia, generating profits by driving down these stock prices.
The shares of Adani group stocks ended down on the stock markets, with flagship Adani Enterprises sliding 3.5% to 2,425 rupees on the NSE.
