SEBI Steps Up Action In Hindenburg-Linked Adani Trading Case

India’s markets regulator has started hearing representations from parties in a case involving trades it suspects benefited from prior knowledge of Hindenburg Research’s 2023 report on the Adani Group, according to a Reuters report.

The Securities and Exchange Board of India (SEBI) is seeking to recover gains that it believes were made through trades based on non-public information. The parties involved are based overseas, but the regulator believes it has jurisdiction because the trades were executed in India.

The proceedings come more than two years after SEBI first detailed its allegations. The parties took time to respond, leading to the start of personal hearings only now.

SEBI Pursues Alleged Short-Selling Gains

SEBI said in 2024 that US-based Kingdon Capital Management had built short positions in Adani-related stocks through a Mauritius-based fund linked to Kotak International before Hindenburg released its report.

Short-selling involves borrowing shares and selling them, then buying them back later at a lower price. The trader earns the difference if the stock falls.

Hindenburg’s January 2023 report accused the Adani Group of securities-law violations, triggering a sharp selloff in its shares. Adani Group denied wrongdoing. SEBI later dismissed Hindenburg’s allegations of stock manipulation against the conglomerate.

In 2024, SEBI said six entities had gained $22.25 million from short-selling trades and described a profit-sharing arrangement between Hindenburg and Kingdon. Hindenburg has previously denied wrongdoing and called SEBI’s assertions “nonsense”.

Mauritius Insolvency Case Adds To Dispute

The case has also moved into Mauritius, where SEBI is trying to protect assets that could potentially be used to recover the alleged gains.

The regulator has opposed court-supervised insolvency proceedings involving K India Opportunities Fund Class F, the Mauritius-based fund used to execute the trades, according to the people cited by the news agency.

SEBI asked a court-appointed receiver in early July to ensure the fund’s assets were not transferred or distributed before the regulator ordered recovery of the alleged gains and interest.

Mauritius’ Supreme Court appointed the managing director of business advisory and restructuring firm Quantuma as receiver in June to control and protect the fund’s assets. Reuters could not determine whether Kingdon had already received or redeemed any of the trading gains.