Jethmalani, in a post of on X, alleged that American businessman Mark Kingdon contacted the US-based short seller to prepare a report on Adani group and later approached Kotak’s International Investment arm (KMIL) to create an offshore entity, named ‘Kotak India Opportunity Fund (KIOF)’ that later took large short positions in Adani shares.
The senior advocate further said that around $43 million were provided by Kingdon through his Kingdon’s Master Fund, which is owned by the Kingdon family. His Chinese-American wife Anla Cheng is also part of the fund, he claimed.
K India Opportunities Fund, subsequently initiated short-selling positions in Adani Enterprises using futures contracts, as per the notice by market regulator issue on June 26. These short positions were closed by February 22, generating a profit of $22 million. By June 1, Kingdon’s fund had transferred $4.1 million from the Adani short sale profits to Hindenburg.
Jethmalani alleged that Cheng is a lobbyist for Chinese interests in the United States and served as the CEO of SupChina, who he claimed is ‘a pro China media corporate initiative’ which later ‘morphed’ into The China Project. He further added that the The China Project was shut down after calls for an investigation by US senators for ‘subversive’ activities including having links to the Chinese Communist Party (CCP), who Jethmalani alleged has a ‘a bone to pick with the Adani group’.
Jethmalani in his post called for a ‘thorough’ investigation into the following issues:
1. Who introduced the Kingdons to KMIL, what due diligence was conducted by KMIL regarding the Kingdons and did it participate in the short sell as a principal?
2. Did all the Indian actors – politicians, businessmen and financial intermediaries who aided Hindenburg with the preparation of its Adani report and its publication after the short sale know about its short selling motives and did they financially benefit from it?
3. Did KMIL and the said Indian actors know about the Chinese connection behind Hindenburg ?
Sebi in its show-cause notice to Hindenburg, questions why action should not be taken against the short-seller for potentially violating regulations related to the “prohibition of fraudulent and unfair trading practices in the securities market”.
The extensive 46-page Sebi notice is addressed to Hindenburg Research, its founder Nathan Anderson, partner investor Mark Kingdon and his associated companies, as well as K India Opportunities Fund, a foreign portfolio investor established by the Kotak group.
Hindenburg has replied to the notice as “nonsense” and “nebulous”, alleging attempts to silence the firm. Despite the $153 billion decline in Adani group’s valuation, Hindenburg claimed it only profited $4 million from the operation.
In a statement, Hindenburg said: “Sebi has neglected its responsibility, seemingly doing more to protect those perpetrating fraud than to protect the investors being victimised by it.”