Explained: What is Hindenburg, the firm which levelled allegations against Adani, Sebi chief?
Hindenburg Research, has released a new report that alleges that the SEBI chief and his wife were stakeholders in offshore firms linked to Adani
Hindenburg Research on Saturday released a report that alleged the Securities and Exchange Board of India (SEBI) did not act on claims it made in its 2023 report against the Adani Group because the market regulator's chief, Madhabi Puri Buch, had investments in offshore firms linked to the conglomerate.
Citing documents from whistleblowers, the firm claimed that the Sebi chief Madhabi Buch and her husband Dhaval Buch had made investments, dating back to 2015, in offshore funds in Bermuda and Mauritius linked to entities allegedly used by the Adani Group to manipulate financial markets.
Their recent claims come on the heels of another investigative report released in January 2023, which alleged that the Adani group had orchestrated the “largest con in corporate history” through stock manipulation and financial misconduct.
Hindenburg Research's 2023 report had led to massive losses for the Adani group, shaving over 100 billion dollars off their market valuation.
Hindenburg had teased the release of their 2024 report, with a cryptic post on X, stating “Something big soon India”.
Also Read: SEBI chief, husband deny allegations in Hindenburg report: 'Our finances are an open book'
What is Hindenburg Research?
Hindenburg Research is a US-based investment research firm, founded by researcher Nathan Anderson. The company specialises in forensic financial research, conducting investigations and analyses on accounting irregularities, unethical business practices, and undisclosed financial issues or transactions.
One of their key practices is short selling, wherein their reports on certain companies inform their position in predicting whether the market prices of certain companies will fall.
Founder and researcher Nathan Anderson refers to himself as an activist shortseller.
The company shares their reports to the board of investors before release to make ‘shorting’ bids on the performance of various financial actors.
Nathan Anderson graduated from the University of Connecticut with a degree in international business and then started his career at data company FactSet Research Systems, where he worked with investment management companies. It was here and through his penchant for finding out scams, he started Hindenburg Research.
The company was named after the Hindenburg disaster in 1937, which was a man-made and avoidable explosion of a German airship.
“We look for similar man-made disasters floating around in the market and aim to shed light on them before they lure in more unsuspecting victims,” their website says.
Since 2017, they have released 16 reports pointing out illegal transactions, financial fraud and more in the United States Securities and Exchange Commission as well as private companies such as Aphyria, Pershing Gold, Nikola and other companies across a spectrum of sectors and countries.
Their investigation into the electric car company Nikola remains one of their biggest reports, which led to a US jury convicting its founder and the company having to pay a 125 million dollar settlement to the US government.
According to a New York Times profile of the company, the Hindenburg team consists of former journalists, including from Bloomberg and CNN, and analysts. They also work with whistle-blowers within the financial sector and the companies they are targeting. The founder has declined to disclose the names of the 10 investors that bankroll this enterprise.
In 2021 and 2022, the firm won the honour of 'top short seller' at the Activist Insight’s Investing Annual Review.
2023 Adani Report
Hindenburg Research first came into the spotlight in the Indian political and financial sphere when they released a report on the Adani group in 2023.
The report claimed that the Adani group's chairman, Gautam Adani, since 2020, had added 100 billion dollars to its valuation through stock price manipulation in 7 key listed companies.
The Hindenburg report alleged that Rajesh Adani, Gautam Adani's younger brother, had been arrested twice for forgery and tax fraud, but was promoted to managing director of the group.
Adani's elder brother, Vinod Ambani, operated 37 shell companies, which were central to the claims of money laundering, according to the firm.
“We believe the Adani Group has been able to operate a large, flagrant fraud in broad daylight in large part because investors, journalists, citizens and even politicians have been afraid to speak out for fear of reprisal,” the Hindenburg report stated.
Hindenburg vs SEBI
In June 2024, SEBI said that Hindenburg Research had shared its findings on the Adani group with a New York-based hedge fund manager and allowed him to trade with this information.
The SEBI had launched investigations into transactions by the Adani group but the probes did not go very far.
Hindenburg's research rubbished SEBI's claims of sharing the report and called it an attempt to silence those questioning corruption by powerful entities in India.
Notably, in January 2023 and in a review in July 2024, the Supreme Court ruled that they could not interfere in the SEBI's jurisdiction to investigate claims against Adani made in the Hindenburg report.
The Supreme Court, according to Hindenburg, had “drawn a blank” when it comes to SEBI's investigation into the Adani group.
2024 SEBI report
After a vague post on X, Hindenburg Research released their report on SEBI's involvement with Adani on Saturday night, amidst market anticipation.
The report claims the SEBI chief Madhabi Buch and her husband had stakes in offshore firms owned by Vinod Ambani, linked to financial misconduct by the Adani group.
The report said, “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.”
In the report, investments by Madhabi Buch and her husband predate her appointment as a member of SEBI in 2017 and as chairperson in 2022.
The report claims that weeks before Buch’s appointment to SEBI in 2017, her husband took over sole control of their investments to avoid coming under the scanner in her position as a market regulator.
Madhabi Buch and her husband Dhaval Buch released a joint statement denying all allegations against them.
They said, "In the context of allegations made in the Hindenburg Report dated August 10, 2024, against us, we would like to state that we strongly deny the baseless allegations and insinuations made in the report. The same is devoid of any truth. Our life and finances are an open book. All disclosures as required have already been furnished to SEBI over the years."