Hindenburg vs SEBI Chief: US short-seller counters SEBI chief's rebuttal statement

While a face-off between the US short seller and SEBI’s Chief is escalating, India's markets regulator has asked investors to remain calm. However, the spat is becoming more controversial with the back and forth between the two parties.

Late on Saturday, the US-based firm released a report with several claims of fraud, including that Buch and her husband, Dhaval Buch, held stakes in offshore entities linked to the Adani group's alleged financial misconduct.

In the afternoon on Sunday, the SEBI chief and her husband released a joint statement, rebutting each allegation point by point. The couple denied all allegations. Instead, they accused Hindenburg of character assassination weeks after SEBI sent a show-cause notice to the US firm for its report against Adani in January 2023.

The market regulator also issued a statement asking investors to remain calm and that the investigation into the Adani group and Hindenburg is ongoing. Later in the evening on Sunday, Hindenburg countered SEBI chief's rebuttal with a further point-by-point allegation.

What are Hindenburg's allegations?

The US firm claims that Buch and her husband had undisclosed investments in offshore funds linked to the Adani group. The report also accuses Buch of being the 100 per cent shareholder of a Singapore fund when she was a full-time member of the SEBI.

Hindenburg alleges that Buch transferred her stake to her husband only two weeks after she took over as the head of SEBI. The allegations suggest a possible conflict of interest for the SEBI’s probe against the Adani group.

SEBI chief, in a statement, said the investment in the fund referred to in the Hindenburg report was made in 2015 when she and her husband were both private citizens living in Singapore and almost 2 years before she joined SEBI.

Buch said the decision to invest in this fund was driven by Dhaval's childhood friend from school and IIT Delhi - the chief investment officer, Anil Ahuja.

The statement denying any link to the Adani group added:

‘as confirmed by Anil Ahuja, at no point in time did the fund invest in any bond, equity, or derivative of any Adani group company.’

Countering that statement, the US firm said, ‘Madhabi Buch's response includes several admissions...and raises numerous new critical questions.’

Hindenburg also challenged the SEBI chief to ‘commit to a full, transparent and public investigation into these issues?’

Broader implications

These allegations have broader implications for both SEBI and the government. The government, though, has not responded to the ongoing drama yet. To start with, these allegations raise several questions. Will the government initiate a separate probe as the opposition has demanded? Should the SEBI chief hold the position under such a scenario? If proven true, the claims could undermine confidence in SEBI's impartiality and regulatory effectiveness.