Hindenburg's charges against Uday Kotak on Sebi notice: ‘Protecting another powerful businessman’
Hindenburg said that the show cause notice was “an attempt to silence and intimidate those who expose corruption."
Hindenburg Research said that it received a 'show cause notice' from the Indian markets regulator Sebi. The US short seller's report on Adani group last year triggered a $150 billion rout in Adani stocks. Slamming the notice as “nonsense, concocted to serve a pre-ordained purpose”, Hindenburg said that it was “an attempt to silence and intimidate those who expose corruption and fraud perpetrated by the most powerful individuals in India.”
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"Much of the notice seemed designed to imply that our legal and disclosed investment stance was something secret or insidious, or to advance novel legal arguments claiming jurisdiction over us. Note that we are a US-based research firm with zero Indian entities, employees, consultants or operations. Some of these arguments seemed circular," Hindenburg said.
Hindenburg also alleged that Sebi conspicuously failed to name Kotak Bank, “one of India’s largest banks and brokerage firms founded by Uday Kotak, which created and oversaw the offshore fund structure used by our investor partner to bet against Gautam Adani.”
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It argued, “Instead it simply named the K-India Opportunities fund and masked the “Kotak” name with the acronym “KMIL”. Uday Kotak, founder of the bank, personally led SEBI’s 2017 Committee on Corporate Governance. We suspect SEBI’s lack of mention of Kotak or any other Kotak board member may be meant to protect yet another powerful Indian businessman from the prospect of scrutiny, a role SEBI seems to embrace.”
Hindenburg also said that in its notice Sebi claimed that the disclaimers in short seller's report "were misleading because it was indirectly participating in the Indian securities market”.
It said, "This wasn’t a mystery—virtually everyone on earth knew we were short Adani because we prominently and repeatedly disclosed it," it said.