After Being Accused of 'Largest Con,' Adani Group Pushes Back Against US Report

Here's a snapshot of the controversy that has been stirred up by allegations of money laundering.

Days after being accused of carrying out an elaborate "con", the Adani Group has reportedly gone on the offensive.

Driving the news: A report published by American short seller Hindenburg Research on Tuesday, 24 January, stirred up new allegations of stock market manipulation and money laundering against the billion-dollar conglomerate founded by Gautam Adani.

• The company has labelled the report as "malicious" and "selective misinformation," according to a BBC report.

• Adani Group is looking to sue Hindenburg Research

But what did the 100-page dossier allege?

Allegation #1: Based on a two-year investigation, Hindenburg Research said that it had identified several offshore shell entities with ties to the Adani Group, most of which are allegedly located in tax havens like Mauritius, Cyprus, Singapore, the UAE, and several Caribbean Islands.

• Purported proof? A few such shell companies allegedly operated by Gautam Adani's elder brother have "no reported employees, no independent addresses or phone numbers and no meaningful online presence." The websites of 13 shell companies contain stock photos and don't name any employees, the report said.

Allegation #2: These shell companies were allegedly used to perform money laundering. These entities were used for "laundering money through Adani’s private companies onto the listed companies’ balance sheets in order to maintain the appearance of financial health and solvency," the report alleged.

• Hindenburg Research purportedly arrived at these allegations after speaking with dozens of sources, including ex company executives, reviewing thousands of documents, conducting diligence site visits in almost half a dozen countries, downloading and cataloguing the entire Mauritius corporate registry, as well as filing RTI requests with Indian markets and securities regulator SEBI.

Allegation #3: Another alleged function of the shell companies was to manipulate the market. "The Vinod-Adani shells seem to serve several functions, including (1) stock parking / stock manipulation," the report said.

The fallout: Bonds associated with Adani Group companies dropped on Wednesday, 25 January, but appeared to recover the following day.

Damage control? Bloomberg and Moneycontrol reported that on Friday, 27 January, that Adani Group executives held a conference call with players such as Barclays Plc, Deutsche Bank AG, Mitsubishi UFJ Financial Group Inc., and Standard Chartered Plc, along with other fixed-income investors.

• On the call, Adani Group reportedly asserted that the accounting fraud allegations were “devoid of facts.”

• Eight of the nine Adani portfolio companies are audited by one of the so-called “big six” auditors, as per a presentation that was reportedly shown to investors.

Meanwhile, Hindenburg Research has responded by saying that Adani Group “hasn’t addressed a single substantive issue we raised.”