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

India's markets regulator, the Securities and Exchange Board of India (SEBI), is actively pursuing a case against Hindenburg Research and other entities in connection with the company Adani Group, according to sources. SEBI initiated a hearing to recover gains from trades that allegedly benefited from prior knowledge of Hindenburg Research's critical report on Adani Group, which was published in 2023.

The regulator claims that U.S.-based Kingdon Capital Management, through a Mauritius-based fund linked to Kotak International, built short positions in Adani-related stocks before the report's publication. Shorting refers to selling borrowed shares and buying them back at a lower price to profit from price declines. Hindenburg's 2023 report alleged that Adani Group had violated securities laws, leading to a selloff of related shares and a $150 billion loss in group value.

Adani Group denied any wrongdoing, and SEBI had previously dismissed the allegations of stock manipulation against the group. In 2024, SEBI disclosed a profit-sharing agreement between Hindenburg and Kingdon, through which six entities gained $22.25 million from short-selling trades. SEBI has now begun personal hearings as the parties involved took time to respond.

The regulator is seeking to enforce its jurisdiction by opposing court-supervised insolvency proceedings in Mauritius for the Kotak fund, which was used to execute the trades, arguing that the trades were based on non-public information and violated rules aimed at preventing fraud. SEBI has requested the court-appointed receiver in Mauritius to prevent fund assets from being transferred or distributed before it orders the recovery of alleged gains and interest.

Mauritius' Supreme Court appointed Quantuma's managing director as the receiver in June to control and protect the fund's assets.