US short seller Hindenburg Research has received a show cause notice from the Securities and Exchange Board of India (SEBI) regarding alleged regulatory violations in its short selling of Adani Group stocks. The firm, known for its critical report on Adani Group alleging stock manipulation and accounting fraud, termed the notice “nonsense” and accused SEBI of attempting to intimidate those exposing corruption.
Hindenburg’s statement follows its January 2023 report, which accused Adani Group of “brazen stock manipulation and accounting fraud scheme over the course of decades.” Hindenburg had disclosed its short position on Adani stocks, anticipating a decline in their value.
The firm revealed that Kotak Bank facilitated an offshore fund structure used by Hindenburg’s “investor partner” to bet against Adani Group. Despite these efforts, Hindenburg stated it may “barely come out above breakeven” on its Adani short. The firm earned USD 4.1 million in gross revenue from its Adani short positions through the investor relationship and just USD 31,000 from shorting Adani’s US bonds.
Hindenburg criticized SEBI for failing to find factual inaccuracies in its Adani research after a 1.5-year investigation. Instead, SEBI objected to the report’s language, including the use of the word “scandal” and quotes alleging SEBI’s corruption.
The firm clarified that it collaborated with only one investor partner, dismissing speculation of widespread shorting of Adani stocks. “Our work on Adani was never justifiable from a financial or personal safety perspective, but it is by far the work we are most proud of,” Hindenburg stated.
The show cause notice, received via email on June 27, outlined suspected violations of Indian regulations. Hindenburg accused SEBI of implying that its disclosed investment stance was secretive or insidious and claimed SEBI sought to advance novel legal arguments for jurisdiction over the US-based firm.
Hindenburg’s report highlighted a network of offshore shell entities controlled by Gautam Adani’s brother, Vinod Adani, and associates. It detailed how billions were moved through these entities without related-party disclosures. Despite Hindenburg’s allegations, Adani Group has repeatedly denied any wrongdoing.
Hindenburg criticized SEBI’s omission of Kotak Bank from the notice, suspecting a deliberate effort to shield another powerful Indian businessman from scrutiny. The firm remains resolute, stating, “To this day, Adani has still failed to address the allegations in our report, instead providing a response that ignored every key issue we raised.”
