SEBI ISSUED NOTICE TO HINDENBURG
SARASIJ MAJUMDER
BACKGROUND:-
The opposition, Left Liberendoos, and paid MEDIA—brayed heavily, once this
HINDENBURG report was mischievously
planned and published to tarnish the
respectful IMAGE of our PM, GOI, effect financial loss to ADANI, earn money in questionable manner, and defame INDIA as a whole.
As the saying goes—“If you become successful, you
will have enemies”
The circle is almost complete now. Request a
careful reading.
SEBI’S INVESTIGATION
Market regulator Securities and Exchange Board of India (SEBI), as per
directions by the Supreme Court, has issued a show-cause notice (SCN) to Hindenburg Research, its sole beneficial
owner Nathan Anderson and Mark Kingdon who is the ultimate beneficial owner of
Mauritius-based entities, for trading violations in the scrip of Adani
Enterprises (NS:ADEL), leading
up to Hindenburg report and thereafter. In the show-cause notice, it is alleged
that Hindenburg colluded with others to build short positions in the scrip of
Adani Enterprises Limited (AEL).
Hindenburg and Anderson are also alleged to have
disseminated misleading information through the Hindenburg report (dated
January 24, 2023), thereby inducing panic selling in AEL, among other
securities.
SEBI accused Hindenburg of sensationalising and distorting
facts and collaborating with a New York hedge fund to profit from the report's
fallout.
The Supreme Court, by its judgment and order dated January
3, 2024, issued directions to SEBI and the investigative agencies of the Union
government to probe into whether the loss suffered by Indian investors due to
the conduct of Hindenburg and any other entities in taking short positions
involved any infraction of the law and if so, to take suitable action.
In a previous order passed in the Writ Petitions, the
Supreme Court took note of the loss of investor wealth in the aftermath of the
report and recognised the dire need to protect Indian investors from
unanticipated volatility in the market.
KOTAK’S INVOLVEMENT.
Hindenburg also highlighted that SEBI’s notice failed to
mention "Kotak" directly, instead using "KMIL" (Kotak
Mahindra Investments Ltd), despite KMIL's role in creating the offshore fund
used by Hindenburg's partner to bet against Adani.
Although KMIL denied any client relationship with
Hindenburg, SEBI noted that Hindenburg’s client, Kingdon Capital Management,
had invested in KMIL’s K-India Opportunities Fund, profiting significantly from
Adani stock positions before the report's release.
SEBI's investigation exposed that Kotak Mahindra (NS:KTKM) and
Hindenburg conspired together to take short positions in Adani shares.
Hindenburg agreed to take a 25 per cent profit cut from
shorting, resulting in millions of dollars in profit.
Chats from Kotak Mahindra bank executives, mentioned by SEBI
in their show-cause notice, reveal how Kotak set up offshore funds to route
money and take short positions in Adani futures, generating profits of $22.11
million.
SEBI's show-cause notice also exposes how Hindenburg's
report was full of conjectures, lies, and misrepresentations, with the sole
intention of maximising profits from their short positions.
Instead of addressing SEBI's investigation, which is based
on documents and proof obtained from US courts and SEC records, Hindenburg has
started attacking SEBI, calling them biased.
Despite claiming small profits from shorting Adani, SEBI's
investigation reveals Hindenburg also made $9.2 million by taking short
positions in ETFs and options on the MSCI India Index, and trading in bonds of
Adani Electricity Mumbai Limited, AGEL, and APSEZ.
SEBI also found that Hindenburg misrepresented Supreme Court
judgment findings, alleged government corruption and bribery without proof.
The show-cause notice states as to why action should not be
taken against them under Sections 11(1), 11(4), 11(4A), 11B(1) and 11B(2) --
read with Sections 15HA and 15HB of the SEBI Act, 1992 -- which provide for the
issuance of directions, including restraint from access to the securities
market, and levying of monetary penalty.
MARK KINGDON AND FAMILY
Mark
Kingdon (an individual who controlled/managed/owned Kingdon Capital, Kingdon
Offshore Master Fund and K India Opportunities Fund.
Behind the KIOF Class F Fund, Mark
Kingdon and Family were the ultimate beneficiaries having 58.8% investment.
The Master Fund behind KIOF Class F Fund was again a pooled fund between
Kingdon Associates, Kingdon Offshore and Kingdon Family Partnership. Mark
Kingdon had the sole discretion of making the investment decision on
investments including Adani Enterprises.
HINDENBURG’S RESPONSE
Hindenburg has claimed that it did not provide research notice to
Kingdon prior to sharing the draft report and Kingdon did not share the trading
notice with Hindenburg before the report was shared publicly through mass
email.
Hindenburg responded saying the notice is
"nonsense" and an attempt to silence and intimidate by alleging that
Hindenburg's report contained misrepresentations and inaccurate statements
meant to mislead readers.
Hindenburg, which published the notice on its website, said
it made just $4.1 million from its declared positions on Adani stocks and
criticised the regulator for not focusing its investigation into the January
2023 report "providing evidence" of the conglomerate creating "a
vast network of offshore shell entities" and moving billions of dollars
"surreptitiously" into and out of Adani public and private entities.
Hindenburg claimed that SEBI's notice seemed designed to
obscure its disclosed investment stance and protect powerful individuals from
scrutiny, pointing out that the notice did not mention "Kotak"
directly, which Hindenburg suggested was an attempt to shield influential
Indian businessmen.
WHAT NEXT :
SEBI's show cause notice to Hindenburg could lead to formal legal
actions such as fines or market bans.
Hindenburg has 21 days to respond.
This case may prompt closer scrutiny of both Hindenburg’s
actions and regulatory oversight of the Adani Group.
Reference:-
Image GOOGLE.
I have not expected KOTAK to be involved in this.
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