India regulator presses ahead against Hindenburg, others in Adani case, sources say

India’s markets regulator, SEBI, is actively investigating allegations that certain parties profited from insider information related to the Adani Group scandal, sources reveal. The regulator has initiated hearings to recover gains from trades that experts believe were influenced by a report by Hindenburg Research, which accused Adani of violating securities laws in 2023.

According to SEBI, a U.S.-based firm, Kingdon Capital Management, built short positions in Adani-related stocks through a Mauritius-based fund tied to Kotak International before the Hindenburg report was published. Short positions involve selling borrowed shares, buying them back at a lower price, and pocketing the difference. Hindenburg's 2023 report claimed that Adani Group's alleged violations led to a $150 billion loss in group value.

The Adani Group has denied any wrongdoing, while the Justice Department has stated that the case should be dismissed due to jurisdictional issues and a low probability of success. SEBI dismissed Hindenburg's allegations of stock manipulation against the group in 2024, detailing a profit-sharing agreement between Hindenburg and Kingdon, through which six entities gained $22.25 million from short-selling trades.

SEBI argues that the trades were based on non-public information, thus violating rules meant to prevent fraud. To recover the alleged gains and interest, SEBI has opposed court-supervised insolvency proceedings in Mauritius for the Kotak fund - K India Opportunities Fund Class F - used to execute the trades. The Mauritius Supreme Court appointed Quantuma as the managing director of the business advisory and restructuring firm Quantuma in June to control and protect the fund's assets, but the firm declined to comment on the matter.