By Urvi Dugar and Shankar Ramakrishnan
U.S. short seller Hindenburg Research said on Monday that India’s securities regulator has sent it a letter outlining suspected violations over its short bet against Adani Group last year and revealing that it may have been “barely above breakeven” on its trade.
Hindenburg also said Kotak Bank, an Indian company, created and oversaw an offshore fund structure that its “investor partner” used to bet against the conglomerate, providing new details about the deals that have baffled investors.
The short seller said he made $4.1 million in gross proceeds from “gains related to shorting Adani shares from that investor relationship” and just $31,000 from shorting Adani shares in U.S. bonds. He did not name the investor.
Hindenburg described the SEBI’s “show cause” notice as an attempt at intimidation, writing that the regulator had made a “vague allegation” that Hindenburg’s report contained misrepresentations and inaccurate statements intended to mislead readers.
“In our view, the SEC has neglected its responsibility and appears to have done more to protect the perpetrators of the fraud than to protect the investors who fell victim to it,” Hindenburg said.
The Securities and Exchange Board of India, Adani Enterprises and Kotak did not immediately respond to requests for comment outside business hours.
The Securities and Exchange Board of India was also investigating Adani, but the Supreme Court of India gave it until August 14 to complete its investigation.
The disclosure of the SEC notice adds a new twist to the saga that erupted last year when Hindenburg, founded by Nathan Anderson, alleged improper business dealings by Adani.
The group, which has denied the allegations, lost up to $150 billion in its combined market value following the report, but has since recovered.
Hindenburg’s response also sheds some new light on the mechanics of his trading, the details of which have intrigued other investors because Indian securities rules make it difficult for foreigners to bet against companies there.
“This was a small position,” the statement said. “But so far, our research on Adani is the work we are most proud of.”
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