Hindenburg allegations against sebi chairman madhabi are not baseless, they are 100% true exposed by a SEBI insider. Madhabi was planted by Adani

Background: The Adani Group Controversy

The Adani Group is one of India’s biggest conglomerates, which has been in controversy for the last 18 months. A report by Hindenburg Research documented a complex web of offshore entities, the bulk domiciled in Mauritius, allegedly used by the Adani Group to facilitate undisclosed related-party transactions and manipulation in its stock. Hindenburg claimed that these offshore entities were a part of a much larger scheme to syphon billions from the Indian public, and thus brought into question the integrity of the financial practices of Adani Group.

Despite the incriminating evidence that Hindenburg’s report presented, and which several independent investigations corroborated, SEBI has been criticized for not acting against the Adani Group. The regulator’s perceived inaction evokes accusations of complicity or negligence more so after the recent revelations concerning the Chairperson.

The Whistleblower Documents

Whistleblower documents indicate that Madhabi Puri Buch and her husband Dhaval Buch first opened an account with a small offshore Mauritius fund setup by an Adani director through India Infoline, IPE Plus Fund 1, on 5 June 2015 in Singapore. This is a fund situated in a complex structure, which goes on to include the Global Dynamic Opportunities Fund in Bermuda, used by Vinod Adani to invest in Adani Group companies.

Documents now show that on March 22, 2017, only weeks before Madhabi’s appointment as a SEBI Whole Time Member, her husband Dhaval wrote a letter to the Mauritius fund administrator regarding their investment in GDOF. During February 2018, when Madhabi was serving at SEBI, she personally wrote to IIFL using her private email for redeeming the units in the fund.

Findings from Whistleblower Documents

The Buchs had opened an account with IPE Plus Fund 1 in Singapore way back on June 5, 2015, much before the appointment of Madhabi as Whole Time Member of SEBI in April 2017. It was connected to a maze of offshore entities controlled by one Vinod Adani, which, in turn, has been linked to the alleged financial wrongdoings of the Adani Group.

During her tenure at SEBI, in February 2018, Madhabi Buch personally reached out to IIFL to redeem units in the fund, raising questions about her motives and possible conflicts of interest. Just before taking over as chairperson of SEBI in March 2022, Madhabi transferred her shares in the offshore consulting firm Agora Partners to her husband, smacking of an attempt to cover up possible conflicts of interest.

Conflicts of Interest and Regulatory Capture

The allegations against Madhabi Puri Buch raise grave concerns about conflict of interest within the very institution charged with the task of regulating corporate governance and investor protection. The possibility of regulatory capture, that is, when regulatory agencies act in the interest of the industries they are to regulate, comes very much to the fore while probing through the financial transactions of the Buchs.

Questionable Points on Madhabi Puri Buch and Dhaval Buch

Recent allegations against Madhabi Puri Buch, Chairperson of the Securities and Exchange Board of India, and her husband, Dhaval Buch, have opened a Pandora’s box with respect to integrity, transparency, and possible conflicts of interest. The Hindenburg Research report suggests a close financial relationship between the Buchs and the offshore entities used to feed money into Adani Group, whose many listed companies have been under investigation for financial misuse. 

This paper will cover some of the critical points of concern regarding the Buchs’ involvement in these offshore funds, the implications for regulatory oversight, and the broader impact on corporate governance in India.

Ties to Offshore Funds

One of the most shocking allegations against Madhabi Puri Buch and her husband has to do with their investments in offshore funds that allegedly support the Adani Group. According to Hindenburg Research, the Buchs owned a stake in IPE Plus Fund 1, a Mauritius-focused fund that is one of those implicated in the Adani money syphoning scandal. This fund forms part of a network of offshore entities reportedly used by Vinod Adani, brother of Gautam Adani, to facilitate undisclosed related-party transactions.  

The Buchs are said to have opened their account with IPE Plus Fund 1 on June 5, 2015, all this while a little more than two years prior to Madhabi’s joining SEBI in April 2017. The proximity of these investments to her taking up the regulatory role raises questions about motivations and possible conflicts of interest.

The Hindenburg report had said that Madhabi Buch used her private email for conducting transactions related to these offshore funds while serving at SEBI. This practice raises tremendous concerns regarding transparency and adherence to regulatory protocols since it affirms that there was no accountability within her financial dealings.

IPE Plus Fund is managed by entities which have direct links with Adani Group, as per the Hindenburg report. The Chief Investment Officer of the fund, Anil Ahuja, has previously worked as a director at Adani Enterprises. That brings direct conflict of interest into play, as Buch is the regulator of entities which may have benefited from her financial ties to these offshore funds.

Financial Opacity and Consulting Firms

The involvement of Madhabi Puri Buch in the operations of an offshore consulting firm, Agora Partners, along with her position at SEBI, casts another shadow on transparency regarding her financial affairs. The engagement was known to have been transferred to her husband just before her appointment as Chairperson, SEBI, which raises very serious questions about the intention behind such transfers and the unaccounted interests.

A red flag can be raised on the transfer of Agora Partners two weeks before Madhabi’s appointment as SEBI Chairperson to Dhaval Buch. This may be viewed as a move to keep herself out of the potential conflicts of interest while having the firm continue to work for her benefit.

There were indications that revenues had been acquired by Agora Advisory, a consulting firm in India affiliated with the Buchs, that would far outweigh the salary of the Chairperson of the SEBI. Such a disparity is the type that does create questions regarding all of the mixed sources of revenue for the Buchs and whether or not they might influence possible regulatory decisions which Madhabi could be faced with.

The opacity that characterises the financial operations of these consulting firms is worrisome. It lacks publicly available information on their clients and revenue streams that primarily drives speculation on possible improprieties and conflicts of interest.

Conflict of Interest with Blackstone

Another major concern is the fact that Dhaval Buch is a senior adviser to Blackstone, one of the largest investment firms in the world. This has raised concerns about potential conflict of interest since some of the orders for SEBI, the market regulator, were passed during Madhabi Puri Buch’s tenure.

Dhaval Buch joins Blackstone just at a time when SEBI is approving regulations perceived to be favourable to the latter. Critics have pointed out that this could represent a glaring case of conflict of interest where regulatory decisions of Madhabi directly benefit her husband’s employer.

While the Buchs mentioned that Madhabi had recused herself on matters concerning Blackstone, how far these measures are effective is highly questionable. The mere act of recusal does not eliminate the possibilities of influence or bias into regulatory decisions where much is at stake for both the Buchs and Blackstone.

Perception of impropriety is as bad as the wrong act itself. The proximity of the Buchs to a financial giant like Blackstone also lends itself to much speculation and distrust in the minds of investors and the general public.

SEBI’s Inaction on Adani Allegations

The broader context of the allegations pertains to the relative inaction of SEBI against the alleged financial wrongdoings of the Adani Group. Hindenburg Research condemned SEBI for not taking strong regulatory action against Adani Group despite overwhelming evidence of their wrongdoings. There is indeed a serious question of integrity to the regulator and its leadership arising from such inaction.

Despite numerous and previous investigations, and given the plethora of visible evidence of financial impropriety, SEBI, through its inability to take strong action against the Adani Group, has found itself at the end of a barrage of allegations of complicity and neglect. The timing of such inaction aligns with that of the Buchs’ financial connection to offshore entities, which increases the suspicions of the people’s motive that governs SEBI’s regulatory pronouncements.

Not taking action against such a big group as Adani takes away the public’s trust in SEBI’s regulatory policy. In case word spreads among investors that the regulatory framework is not in place, that will make them more unlikely to invest in the Indian markets, which, in the long run, can have a bearing on economic growth.

The Buchs allegations have raised the pitch for accountability at SEBI. There are demands from stakeholders for more transparency and stringent rules to avoid conflicts of interest and to uphold the integrity of the regulatory framework.

Response of the Buchs 

The detailed statement has been issued in response to the allegations by Madhabi and Dhaval Buch. It says that they have invested as private citizens prior to the appointment of Ms. Madhabi in SEBI, and they have complied with all the relevant disclosures and recusal measures against the charges labelled by Hindenburg Research.

The defensive reaction of the Buchs to the allegations creates the perception that diversion from the main issue is being done. Their constant assertion of ‘not guilty’ fails to remove apprehensions related to the possibility of conflict of interest.

The Buchs have portrayed the allegations as a means of character assassination. By this, they meant that the claims had other ill motives. Again, this would be another line of defence that does not address the questions of transparency and accountability at the heart of the accusations.

The nature of the allegations is grave, and therefore investigation of the financial dealings of the Buchs becomes a call of the hour in order to determine its impact on SEBI’s regulatory actions. The only charismatic probe can help restore the integrity of SEBI.

Allegations against Madhabi Puri Buch and her husband, Dhaval Buch, raise massive red flags over questions of conflict of interest, transparency, and integrity in the cases involving SEBI as a regulator. Ties of Buchs with the offshore funds invested in the Adani Group, on the one hand, and Dhaval’s role at Blackstone on the other hand, set the stage for endless speculation and mistrust.

These allegations indeed warrant a head-on attack by SEBI to regain public confidence, genuinely protect its investors, and guarantee the fair play of markets. This should include investigations concerning the financial dealings of Buchs and his associates, more policy measures on conflict of interest, and transparency and accountability for the regulatory action taken.

The future of corporate governance in India depends on how independently, without undue influence, regulatory bodies like SEBI can function. It is inextricably linked to the commitment towards transparency and accountability for preserving the integrity of the financial markets in India.

It was set up to protect the interests of investors in securities and to promote the development of the securities market. Further, it is their mandate to regulate stock exchanges, protect the interest of investors, and ensure the fairness of trading practices. However, the allegations against Madhabi Puri Buch hint at a possible failure in this mandate, more so within the context of the Adani Group scandal.

 No Action Against Adani by SEBI

The Supreme Court has taken cognizance of the fact that SEBI had “drawn a blank” in its investigation into who funded Adani’s offshore shareholders. Hindenburg is of the view that the reluctance of SEBI to take meaningful action against suspect offshore shareholders in the Adani Group may relate to complicity by Chairperson Madhabi Buch in using exactly the same funds used by Vinod Adani.

Humans today have no objection if Adani’s shares are to be taken over by SEBI, which Hindenburg and Financial Times claim are owned by the same operators of India Infoline. However, SEBI has not taken any action to date concerning these other suspect Adani shareholders under India Infoline: EM Resurgent Fund and Emerging India Focus Funds.

The Outcome 

The allegations against the chairperson of SEBI, Madhabi Puri Buch, are serious in nature and certainly call for an inquiry. Evidence provided by Hindenburg Research shows much to question the integrity of SEBI and its resultant capability to regulate financial markets in the country.

What this might entail immediately is that, as the situation unfolds, there is an imperative on SEBI and the Indian government to take serious action toward the restoration of public confidence in its regulatory framework. It thereby addresses potential conflicts of interest, lays down transparency in regulatory processes, and reiterates their commitment to the protection of investors and upholding the integrity of the financial markets.

The allegations leveled against Madhabi Puri Buch obviously have a wider angle, such as those relating to corporate governance in India: the relationships that regulators share with the entities they oversee. A compromised regulatory framework risks loss of confidence by the investing community and, therefore, cripples the potential growth of India’s capital markets.