Hindenburg Explained: Who are the Hindenburg boys and why are they after Sebi boss Madhabi Puri Buch?

Just when most people thought that Adani vs Hindenburg The controversy was over, the whistleblower who makes money by short selling shares and bonds of his target companies has added a new twist to the never-ending saga by claiming that the head of Sebi Madhabi Puri Book and her husband had stakes in offshore entities linked to the Adani family.

The allegations come a month and a half after Sebi issued a show-cause notice to Hindenburg for violating Indian market regulations and making profits by taking short positions.

Who is Hindenburg and how does he make money?
Hindenburg Research is a small US-based activist and investment firm founded in 2017 by Nathan AndersonWith the help of a handful of investigators, Hindenburg uses financial forensic tools to find potential accounting irregularities and other corporate governance issues at mostly high-profile companies. In the past, the whistleblower has targeted companies including Nikola, Clover Health, Block Inc, Kandi and Lordstown Motors.

Hindenburg’s business model is simple: it shares the report with its clients in advance, who profit by taking short positions in the selected companies long before the report is made public. As the company’s stock falls after the report is published, both Hindenburg and its clients benefit financially.

In the Adani case, Hindenburg admitted to making $4.1 million in gross revenue, but said it would be difficult to break even given the high costs of conducting a two-year global investigation.

Why is Hindenburg suddenly going after Sebi?
Hindenburg has been on the defensive in the Adani case since the Supreme Court refused to hand over the probe to the CBI or form a SIT.

While Sebi’s probe into the allegations of stock manipulation and the post-Hindenburg market crash is yet to be completed, Adani Group shares recovered all their Hindenburg-era losses in June this year.

Last month, Hindenburg wrote another blog post in which he dragged… Kotak Mahindra Bank entered the controversy and this time it was Sebi.

Hindenburg said Sebi chair Madhabi Puri Buch and her husband Dhaval Buch held stakes in offshore funds based in Bermuda and Mauritius used by Gautam Adani’s brother Vinod Adani “to accumulate and trade large positions in Adani Group shares.”

“In short, despite the existence of thousands of reputable Indian mutual fund products – an industry it is now responsible for regulating – the documents show that SEBI Chairperson Madhabi Buch and her husband held stakes in a multi-layered offshore fund structure with minuscule assets, spanning known high-risk jurisdictions, overseen by a firm with reported links to the Wirecard scandal, in the same entity run by an Adani director and significantly used by Vinod Adani in the alleged Adani cash siphoning scandal,” the report said.

That Head of Sebi What does Madhabi Puri Buch say in her defense?
The Buch family has issued a statement in which it categorically denies the “unfounded accusations and insinuations.”

“These documents are devoid of any truth. Our life and finances are an open book. Over the years, we have already provided SEBI with all the information that has been requested from us. We do not hesitate to disclose all financial documents, including those relating to the period when we were strictly private citizens, to any authority that requests them,” Madhabi and Dhaval Buch said.

It is unfortunate that Hindenburg Research, against whom SEBI has taken enforcement action and issued a show cause notice, has decided to try to defame him in response to the same, the family said.

Are the Adanis and Buch families related?
The Adanis have denied any “business relationship” with the Buch family, as stated in the report, which they call a “red herring.”

“The Adani Group has absolutely no business relationship with the individuals or matters mentioned in this deliberate and calculated effort to malign our reputation. We remain firmly committed to transparency and compliance with all legal and regulatory requirements,” the conglomerate said.

For a discredited short seller who is under scrutiny for several violations of Indian securities laws, Hindenburg’s allegations are nothing but red herrings thrown around by a desperate entity with complete disregard for Indian laws, he said.