Two investors who pumped in hundreds of millions of dollars into the Adani Group through offshore funds have close ties to its promoters, the Organised Crime and Corruption Reporting Project claimed in a report published on Thursday.

This raises questions about the possible violation of Indian stock market rules.

The investment in Adani stocks was made through “opaque” investment funds based in Mauritius, the global network of investigative journalists alleged. These were set up by two associates of the Adani family – Chang Chung-Ling from Taiwan and Nasser Ali Shaban Ahli from the United Arab Emirates.

According to OCCRP, both men have longtime business ties to the Adani family and have served as directors and shareholders in the Adani Group companies. They are also associated with Vinod Adani, the elder brother of group chairman Gautam Adani.

The Financial Times and The Guardian collaborated with OCCRP on the report.

American investment firm Hindenburg Research had in January alleged that Vinod Adani is responsible for creating and managing a vast network of offshore shell entities meant for stock parking, market manipulation and laundering money, to help the conglomerate’s companies maintain their appearance of financial health.

Documents accessed by OCCRP seemed to show that Chang and Ahli placed a large sum of money in the Mauritius funds, which was subsequently used to trade shares of four Adani companies – Adani Power, Adani Enterprises, Adani Ports, and Adani Transmissions – between 2013 and 2018.

The media organisation said that while there was no evidence that Chang and Ahli’s money for their investments originated from the Adani family, there is proof that their trading in Adani stocks “was coordinated with the family”.

At one point in March 2017, the value of their investments in Adani Group stock stood at $430 million (3,552 crores), the report said.

The development raises questions about the possible violation of the Securities Contract (Regulation) Act, which stipulates a minimum 25% public shareholding in listed companies.

At the peak of their investment, Ahli and Chang alone held between 8% and 13.5% of the free-floating shares of four Adani companies, according to OCCRP.

Arun Agarwal, a stock market specialist and transparency advocate, told OCCRP that it is illegal for any company to hold over 75% of its shares.

“When the company buys its own shares above 75%… it’s not just illegal, but it’s share price manipulation,” Agarwal added. “This way the company [creates] artificial scarcity, and thus increases its share value – and thus its own market capitalisation.”

Hindenburg report probe

On January 24, Hindenburg Research in a report alleged that the Adani Group was pulling off the “largest con in corporate history”. Hindenburg claimed that the conglomerate has been involved in accounting fraud, improper use of tax havens, and money laundering.

The Adani Group had rejected these allegations but the report still pummeled the stocks of the conglomerate’s listed companies.

In May, an expert panel constituted by the Supreme Court to oversee investigations into the Adani Group had said that prima facie it was not possible to conclude whether there had been any regulatory failure in the case.

The panel had noted that the Securities and Exchange Board of India has “drawn a blank” in its inquiry into suspected violations in foreign investments in the Adani Group and added that its investigation in the case could be a “journey without a destination”.

The market regulator, in a court filing, had also denied investigating the Adani Group in the past.

However, a document found by OCCRP during its investigation suggests that the Directorate of Revenue Intelligence had told SEBI in 2014 that it had evidence regarding the activities of the “offshore funds” linked to the Adani Group.

“There are indications that a part of the siphoned-off money may have found its way to stock markets in India as investment and disinvestment in the Adani Group,” Najib Shah, Director General of the Directorate of Revenue Intelligence Director General, had told SEBI.

An unidentified official at SEBI, however, said that the regulatory body’s interest in investigating the alleged offshore accounts linked with the Adani Group seemed to have disappeared after Narendra Modi was elected as prime minister in 2014, reported The Guardian.

Adani rejects allegations

On its part, the Adani Group in a statement on Thursday categorically rejected what it described as “recycled allegations” and claimed that the timing of the news reports was suspicious, mischievous and malicious.

The group said the reports seem to be yet another “concerted bid” by Hungarian-American businessman George Soros-funded “interests” to revive the Hindenburg allegations.

“Further, it is categorically stated that all the Adani Group’s publicly listed entities are in compliance with all applicable laws including the regulation relating to public shareholdings,” the conglomerate told OCCRP.

Adani stocks fall

Nonetheless, the shares of all stocks of the Adani Group nosedived in the equity markets on Thursday. The flagship Adani Enterprises was down 2.3% at 12.15 pm. All other companies of the conglomerate were also making losses in the range of 2.1% to 2.8%.

The Congress targeted the Narendra Modi government, alleging a collusion between the prime minister and the Adani Group.

“From 28th January to 28th March, Congress party asked 100 questions to PM Modi regarding Adani...We have no information that who owns Rs 20,000 crores in Adani’s shell companies,” the party’s general secretary Jairam Ramesh said at a press conference. “...This is not an Adani issue, this is a ‘Modani’ issue. The real issue is the relationship between PM Modi and Adani.”

Congress leader Rahul Gandhi will address a press conference at 5 pm on Thursday, Ramesh added.

Trinamool Congress MP Mahua Moitra referred to Adani as BJP’s “best friend”, saying that all allegations against him “magically disappeared” since the party came to power in 2014. “Chickens will come home to roost soon,” Moitra wrote in a tweet. “Justice maybe delayed but it won’t be denied.”