Report alleges stock manipulation, fraud in Adani Group

On Jan. 24, Hindenburg Research released a report titled “Adani Group: How the World’s 3rd Richest Man is Pulling the Largest Con in Corporate History.” This report details the findings of a two-year investigation and claims the group engaged in stock manipulation and accounting fraud schemes over the course of decades.

Gautam Adani, who was worth roughly $120 billion when the report was released, is the founder and chairman of Adani Group. Over the past three years, he has gained over $100 billion through the group’s seven key listed companies. Eight of the 22 key leaders are Adani family members.

The report also alleges the mass use of shell entities based in tax havens, including 38 in Mauritius and others in Cyprus, the United Arab Emirates, Singapore, and several Caribbean Islands. The report ends with 88 questions to Adani to “give the company a chance to be transparent.”

Of the 88 questions the Hindenburg report raised, Adani says that 65 of them were related to matters that have been disclosed by Adani portfolio companies in annual reports, while the rest relate to public shareholders and third parties, and some were “baseless allegations based on imaginary fact patterns.”

In the week since Hindenburg Research released their report, the Adani Group has lost about $50 billion in value, while Gautam Adani has lost over $20 billion in value; Forbes estimates his worth (as of writing) to now be $96.7 billion, placing him as the seventh-richest person in the world.

The Indian stock market slipped on Wednesday, the day after Hindenburg Research released the report. The markets were closed on Thursday in respect of Republic Day. On Friday, some of the companies dropped 20 percent in value, the maximum allowed by exchanges, before trading stopped. Overall, India’s benchmark stock index fell 1.6 percent, the worst drop for the market in more than a month.

Hindenburg Research is a New York-based investment firm that made a name for itself by betting against cryptocurrency companies and unprofitable electric vehicle makers. The report discloses that the group hold short positions in Adani Group Companies through U.S.-traded bonds and non-Indian traded derivatives, meaning they are betting that there will be a short-term drop in the price of these equities.

This isn’t the first time the group has been accused of fraud. Four major government fraud investigations have alleged money laundering, theft of taxpayer funds, and corruption, which total $17 billion. A number of relatives of Adani have been accused of other fraud schemes and were later promoted to director-level positions.

In response to Hindenburg Research’s report, Adani released a 413-page response on Sunday that says the Hindenburg Research report was driven by “an ulterior motive,” that it was a “calculated attack,” and claims the allegations are false. On Thursday, Adani said that it is considering taking action against Hindenburg. Hindenburg, however, responded that they would “welcome it” and that “If Adani is serious, it should also file suit in the U.S. where we [Hindenburg] operate. We have a long list of documents we would demand in a legal discovery process.”