Adani Group Faces Scrutiny Over Alleged Secret Shareholdings

New documents suggest that associates of Gautam Adani’s brother Vinod secretly held billions of dollars worth of shares in Adani Group companies, raising fresh questions about potential stock manipulation and insider trading. The findings approach after a 2023 report by Hindenburg Research accused the conglomerate of a “brazen stock manipulation and accounting fraud scheme.”

Internal Bank Investigation Reveals Hidden Stakes

An internal investigation by Italy’s largest bank, Intesa Sanpaolo, uncovered the shareholdings of Taiwanese businessman Chang Chung-Ling and Nasser Ali Shaban Ahli from the United Arab Emirates. These individuals are reportedly associates of Vinod Adani. The investigation was prompted by the allegations made by Hindenburg Research in January 2023.

Scale of Shareholdings

According to a memo to Intesa Sanpaolo executives, Chang held just over $1 billion and Ahli held just over $2 billion in hedge fund units potentially invested in Adani Group companies on the day after the Hindenburg report was released. The documents indicate these stakes were held up to the release of the Hindenburg report on January 24, 2023.

Suspicions of Stock Manipulation

The revelations are expected to fuel suspicions about the soaring valuations of Adani Group companies in the years leading up to the Hindenburg report and may prompt Indian regulators to investigate potential insider manipulation of share prices. Hindenburg Research had specifically claimed that associates were used to artificially inflate the group’s market capitalization.

Bank Actions and Regulatory Response

Intesa Sanpaolo placed restrictions on Chang and Ahli’s accounts and filed suspicious transaction reports with regulators. The Securities and Exchange Board of India (SEBI) previously cleared the Adani Group of fraud allegations included in Hindenburg’s report, but stated it was investigating the short seller for “unfair trade practices.” The status of SEBI investigations into potential insider trading remains unclear.

Previous Allegations and Investigations

The Adani Group has previously been the subject of four major government fraud investigations alleging money laundering, theft of taxpayer funds, and corruption, totaling an estimated U.S. $17 billion.

Adani Group’s Response

Adani Group denies any wrongdoing and asserts its full compliance with all laws and disclosure requirements. The group accused the Organized Crime and Corruption Reporting Project and the Financial Times of colluding to rehash previously addressed allegations. They maintain that listed companies are not responsible for the source of funds of public shareholders beyond regulatory disclosures.

Elara Capital’s Role

The investigation also highlighted the role of Elara Capital, a UK-based firm that managed funds holding Adani shares. Hindenburg Research had accused Elara of structuring funds to conceal their ultimate beneficial ownership. Lord Jo Johnson resigned as chair of Elara shortly after the Hindenburg report was published.

Swiss Investigation

A Swiss court is investigating Chang Chung-Ling for alleged money laundering and forgery, suspecting him of being an Adani “frontman.”

Adani Group Structure and Valuation

The Adani Group is structured with multiple listed companies and relatively little public “free floats” of shares. In the two years before the Hindenburg report, the total market capitalization of Adani’s 10 listed companies quadrupled, peaking at $288 billion in 2022, briefly making Gautam Adani the world’s second-richest man. As of this year, their capitalization totals around $160 billion.