Securities and Exchange Board of India Chairperson Madhabi Buch and her husband Dhaval Buch had “hidden stakes” in offshore entities tied to stock price manipulation and money laundering by the Adani Group, American short-seller Hindenburg Research alleged on Saturday citing whistleblower documents.

Madhabi and Dhaval Buch denied the allegations in a statement to the press. The Adani Group has also denied the allegations, calling Hindenburg’s report “malicious, mischievous and manipulative selections of publicly available information to arrive at pre-determined conclusions for personal profiteering”.

“The Adani Group has absolutely no commercial relationship with the individuals or matters mentioned in this calculated deliberate effort to malign our standing,” the conglomerate said in an exchange filing.

This came 18 months after Hindenburg Research presented evidence in support of its claim that the Adani Group was behind “the largest con in corporate history”.

Hindenburg Research had said in January 2023 that the Adani Group’s companies were on a “precarious financial footing” and had amassed substantial debt by pledging overvalued shares. It accused the group of accounting fraud and money laundering using offshore tax havens.

India’s markets regulator, led by Madhabi Buch, had “drawn a blank” in its investigation of the allegations last year and told a Supreme Court-appointed panel that further enquiry could be a “journey without a destination.”

In July, Hindenburg Research said it had received a show-cause notice from the Securities and Exchange Board of India outlining alleged violations in its short-selling of Adani Group stocks.

“We suspect SEBI’s unwillingness to take meaningful action against suspect offshore shareholders in the Adani Group may stem from Chairperson Madhabi Buch’s complicity in using the exact same funds used by Vinod Adani, brother of Gautam Adani,” Hindenburg Research has said. “If SEBI really wanted to find the offshore fund holders, perhaps the SEBI chairperson could have started by looking in the mirror.”

The allegations

“As detailed in our original Adani report, documents from the Directorate of Revenue Intelligence alleged that Adani ‘grossly’ overvalued the import valuation of key power equipment, using offshore shell entities to siphon and launder money from the Indian public,” said Hindenburg Research on Saturday.

An investigation by the non-profit Adani Watch in December 2023 showed how a web of offshore entities controlled by Gautam Adani’s brother, Vinod Adani, received funds from the alleged over-invoicing.

In one example of this alleged malfeasance, a Vinod Adani-controlled company had invested in the Global Dynamic Opportunities Fund in Bermuda, an offshore tax haven. This entity then invested in IPE Plus Fund 1, a fund registered in Mauritius, another tax haven.

IPE Plus Fund 1 then invested money in the Indian financial markets.

“What we hadn’t realized: the current SEBI Chairperson and her husband, Dhaval Buch, had hidden stakes in the exact same obscure offshore Bermuda and Mauritius funds, found in the same complex nested structure, used by Vinod Adani,” Hindenburg Research said on Saturday.

Madhabi and Dhaval Buch seem to have first invested in IPE Plus Fund 1 on June 5, 2015, in Singapore, per the whistleblower documents accessed by the short-seller. The source of the investment was noted as “salary” while the couple’s net worth at the time was estimated to be $10 million.

On March 22, 2017, weeks before Madhabi Buch joined the Securities and Exchange Board of India as a full-time member, Dhaval Buch wrote to a Mauritius fund administrator requesting to “be the sole person authorised to operate the Accounts”, Hindenburg Research alleged, with a copy of the purported email as evidence.

The action seemingly moved “the assets out of his wife’s name ahead of the politically sensitive appointment”, Hindenburg Research said.

Subsequently, in February 2018, Buch wrote to a fund manager from her private Gmail account, seeking to redeem the units her husband was holding in the Global Dynamic Opportunities Fund.

“Despite the existence of thousands of mainstream, reputable onshore Indian mutual fund products, an industry she now is responsible for regulating, documents show SEBI Chairperson Madhabi Buch and her husband had stakes in a multi-layered offshore fund structure with miniscule assets…in the same entity run by an Adani director and significantly used by Vinod Adani in the alleged Adani cash siphoning scandal,” Hindenburg Research has said. “We do not think SEBI can be trusted as an objective arbiter in the Adani matter.”

Buch is the first woman to become a full-time member of the Securities and Exchange Board, in 2017, and the first person from the private sector to become its member and later chairperson in 2022, according to The Hindu.

The documents accessed by Hindenburg Research also suggest a quid pro quo arrangement between SEBI and the private equity group Blackstone, where Dhaval Buch was appointed as an advisor in July 2019 – despite his apparent lack of experience in real estate or capital markets.

After Madhabi Buch became its chairperson in March 2022, the Securities and Exchange Board of India proposed or implemented a raft of legislations in connection with Real Estate Investment Trusts, or REIT, a category of investments that is still nascent in India.

According to Hindenburg Research, these significantly benefitted Blackstone, one of the largest promoters of REIT in India. While Madhabi Buch was at the helm of SEBI, Blackstone sponsored the IPOs of Mindspace and Nexus Select Trust, India’s second and fourth REIT to get the market regulator’s approval.

Hindenburg Research has accused Madhabi Buch of publicly championing REIT as a favourable investment opportunity in India without disclosing “the obvious beneficiary of these regulations: the fund her husband advises, Blackstone”.

Responding to the short-seller’s claims, the couple said on Saturday: “We strongly deny the baseless allegations and insinuations made in the report…All disclosures as required have already been furnished to SEBI over the years. We have no hesitation in disclosing any and all financial documents, including those that relate to the period when we were strictly private citizens…It is unfortunate that Hindenburg Research against whom SEBI has taken an Enforcement action and issued a show cause notice has chosen to attempt character assassination in response to the same.”

Hindenburg Research has also alleged that Madhabi Buch had a 100% interest in an offshore Singaporean consulting firm registered in 2013 called Agora Partners, till March 2022.

On March 16, 2022, two weeks after she became the chairperson of the Securities and Exchanges Board, “Buch quietly transferred the shares to her husband”. She still has a 99% stake in the entity.

“This offshore Singaporean entity is exempt from disclosing financial statements so it is unclear the amount of revenue it derives from its consulting business and from whom – crucial information for those assessing the probity of the Chairperson’s external businesses interests,” Hindenburg Research said.

At the end of the financial year 2021-’22, Agora Advisory had generated Rs 19.8 million in revenue, according to its annual report cited by Hindenburg Research. This is more than four times Madhabi Buch’s previously disclosed salary as a full-time member of the Securities and Exchange Board of India.

Also read: SEBI knew about allegations against Adani Group since 2014, letter shows