Fund named by Hindenburg part of structure used by two overseas funds probed by Sebi

“We don’t know if she recused herself when the investigation was going on. Ideally, she should have recused herself and disclosed that she had invested in the fund structure in the time period that was under investigation,” said a former wholetime member with Sebi. A statement jointly issued by the Sebi Chairperson and her husband, though, said that “disclosures and recusals have been diligently followed” as per the code of conduct applicable to its officers.

The funds were being probed by the market regulator for its “long-standing suspicion” that some public shareholders of the Adani Group “could be fronts for the promoters”. In a report released Sunday, the US-based Hindenburg Research claimed that the Sebi Chairperson “had a stake in obscure offshore entities used in the Adani money siphoning scandal.”

According to Sebi records, Emerging India Focus Funds and EM Resurgent Fund, two of the Adani Group’s 13 foreign portfolio investors (FPIs) under investigation, declared Trident Trust Company (Mauritius) as their beneficial owner.

Corporate records accessed by The Indian Express show that Trident Trust Company (Mauritius) is also the administrator of Global Opportunities Fund (Bermuda), the parent entity of IPE Plus Fund 1 (Mauritius), where the Sebi Chairperson held a stake worth at least Rs 5.5 crore until February 2018.

While a detailed email sent to Madhabi Puri Buch did not elicit any response, in a statement issued jointly with her husband on Sunday, she said: “Sebi has strong institutional mechanisms of disclosure and recusal norms as per the code of conduct applicable to its officers. Accordingly, all disclosures and recusals have been diligently followed, including disclosures of all securities held or subsequently transferred.” She further said that “Hindenburg has been served a show cause notice for a variety of violations in India. It is unfortunate that instead of replying to the Show Cause Notice, they have chosen to attack the credibility of the Sebi and attempt character assassination of the Sebi Chairperson.”

A statement issued by 360 One WAM Ltd, however, said, “Throughout the fund’s tenure, IPE-Plus Fund 1 made zero investments in any shares of the Adani Group either directly or indirectly through any fund.”

Last year, documents accessed by the reporters’ consortium Organized Crime and Corruption Reporting Project (OCCRP) showed that Vinod Adani, the elder brother of Adani Group chairman Gautam Adani, set up Assent Trade and Investment Private Limited (ATIL) in October 2010 as the sole shareholder.

Until 2010-2011, annual reports of Adani Power Limited listed Vinod Adani, the Vinod Adani Family Trust and Vinod Adani HUF as part of the promoter group.

Funded by entities owned by Vinod Adani, records accessed by OCCRP showed that ATIL moved $100 million by May 2012 to the Global Opportunities Fund (GOF). In August 2013, ATIL subscribed to a sub-fund of GOF in Bermuda — Global Dynamic Opportunities Fund (GDOF) — which, in turn, invested in IPE Plus Fund 1 (Mauritius) that put money in the Indian stock market.

With approximately $522.2 million in assets, Global Dynamic Opportunities Fund Limited (Bermuda) is a hedge fund operated by IIFL Capital Pte Ltd which also manages IPE Plus Fund.

Last August, the British daily Financial Times reported that to pick up and trade in Adani stocks, funds from unknown sources were channelled by two British Virgin Islands shell companies – United Arab Emirates national Nasser Ali Shaban Adil’s Gulf Asia Trade and Investment Limited and Taiwan national Chang Cung-Ling’s Lingo Investment Limited through a structure under Global Opportunities Fund (Bermuda), using the two Mauritius funds being probed by the Sebi.

Under the requirement of the Prevention of Money Laundering Act (PMLA), show Sebi records, both Emerging India Focus Funds and EM Resurgent Fund named a Mauritius company — Emerging India Fund Management Ltd (EIFM) — as their controlling shareholder under the Emerging Fund Trust and its trustee Trident Trust Company (Mauritius).

As reported by The Indian Express last September, Mauritian financial regulator Financial Services Commission (FSC) revoked the business and investment licences of EIFM in May 2022, a full eight months before the first Hindenburg report flagged alleged irregularities in the Adani Group.

In its licence revocation notice, the FSC held that EIFM “acted in breach” of various sections of the Financial Services Act, the Securities Act, the Financial Intelligence and Anti-Money Laundering Regulations (2003 and 2018) and the Code on the Prevention of Money Laundering and Terrorist Financing.

These alleged breaches relate to non-compliance on maintaining records of clients and transactions, accounting and auditing standards; safeguards against dummy officers; corporate governance and the prescribed internal mechanism to identify risks of money laundering.

Hours after Hindenburg Research raised questions of conflict of interest alleging that Sebi was unwilling to take action against the Adani Group as its chairperson had a stake in the company’s offshore entities, the conglomerate rubbished the claims calling it “malicious, mischievous and manipulative”.

Earlier, Madhabi and her husband said in a statement that they strongly denied the “baseless allegations and insinuations made in the report”. “The same are devoid of any truth. Our life and finances are an open book,” they said.