Hindenburg Research, on August 10, made serious allegations regarding the involvement of SEBI Chairperson Madhabi Puri Buch and her husband, Dhaval Buch, in a Mauritius-based offshore fund called 'IPE Plus Fund 1,' which allegedly received investments from a Bermuda-based fund tied to Vinod Adani, the elder brother of billionaire Gautam Adani.
The U.S.-based short seller alleged that ATIL, a Vinod Adani-controlled company, subscribed to Bermuda's Global Dynamic Opportunities Fund (GDOF), a sub-fund of Global Opportunities Fund. The Financial Times had alleged that the parent fund was used by two Adani associates to amass and trade large positions in Adani Group shares.
Citing a whistleblower report, Hindenburg Research stated that this GDOF fund invested ATIL's money in the Mauritius-registered IPE Plus Fund 1—where the Buch couple were also invested—which then used these funds to invest in Indian stocks and trade in equity shares, derivatives, and other financial instruments. The funds are managed by 360 ONE WAM Ltd (formerly India Infoline or IIFL), according to the report.
IPE Plus Fund 1 and GDOF Alleged Connection
Hindenburg Research cited an AdaniWatch report suggesting that ATIL had a total balance of $40.38 million with GDOF by March 2017. "Sitting below GDOF in the multi-layer structure (two layers below the Global Opportunities Fund) is the IPE Plus Fund, a small and obscure offshore fund registered in Mauritius. The IPE Plus Fund had only $38.43 million in assets under management (AUM) at the end of December 2017, per IIFL disclosures," Hindenburg Research said.
Hindenburg suspects that a significant portion of the assets in these funds may comprise Adani money.
The research firm further claimed that the IPE Plus Fund, beyond being a purported channel for Vinod Adani’s money, had other close ties to the Adani group. The Founder and Chief Investment Officer (CIO) of the IPE Plus Fund was Anil Ahuja, who, according to his biography and exchange disclosures, served as a director of Adani Enterprises for three terms spanning nine years, ending in June 2017. He had previously been a director of Adani Power.
SEBI Chair and IPE Plus Fund 1 Alleged Connection
According to Hindenburg Research, whistleblower documents indicate that Madhabi Buch and her husband, Dhaval Buch, appeared to have opened an account with IPE Plus Fund 1 on June 5, 2015, in Singapore. A declaration of funds, signed by a principal at IIFL, stated that the source of the investment was “salary” and estimated the couple’s net worth at $10 million.
Hindenburg noted that Madhabi Puri Buch was appointed a “Whole Time Member” of SEBI in April 2017. However, on March 22, 2017, just weeks before this politically sensitive appointment, her husband, Dhaval Buch, allegedly contacted Mauritius fund administrator Trident Trust regarding their investment in GDOF.
In the letter, Dhaval Buch requested to “be the sole person authorized to operate the accounts,” seemingly moving the assets out of his wife’s name ahead of the politically sensitive appointment, according to Hindenburg Research.
Later, on February 25, 2018, during Buch’s tenure as a Whole-Time Member of SEBI, whistleblower documents show that she personally wrote to India Infoline using her private Gmail account, conducting business through her husband’s name, to redeem the units in the fund.
"In brief, despite the existence of thousands of mainstream, reputable onshore Indian mutual fund products—an industry she is now responsible for regulating—documents show SEBI Chairperson Madhabi Buch and her husband had stakes in a multi-layered offshore fund structure with minuscule assets, traversing known high-risk jurisdictions, overseen by a company with reported ties to the Wirecard scandal, in the same entity run by an Adani director and significantly used by Vinod Adani in the alleged Adani cash siphoning scandal," Hindenburg said.
Hindenburg stated that it was "unsurprising that SEBI was reluctant to follow a trail that may have led to its own chairperson."
360 ONE WAM clarification on IPE-Plus Fund 1 In a clarification, 360 ONE WAM said the IPE-Plus Fund 1 was a fully compliant and regulated fund, launched in October 2013 and operated until October 2019. At its peak, the fund's AUM reached approximately $ 48 million,
360 ONE WAM said throughout the fund's tenure, IPE-Plus Fund 1 made zero investments in any shares of the Adani Group either directly or indirectly through any fund -- with over 90 percent of the fund consistently invested in bonds.
"The fund was managed as a discretionary fund by the Investment Manager. No investor had any involvement in the fund's operations or investment decisions. Mrs. Madhabi Buch & Mr. Dhaval Buch's holdings in the fund were less than 1.5 per cent of the total inflow into the fund. 6. 360 ONE Asset Management reaffirms that all its funds are fully compliant with all applicable regulations, and we adhere to the highest standards of corporate governance," it said.
Buchs issue clarification on investments, Anil Ahuja link
The Buch couple said the investment in the fund referred to in the Hindenburg report was made in 2015 when they were both private citizens living in Singapore and almost two years before Madhabi joined SEBI, even as a Whole Time Member.
The decision to invest in the fund was because the Chief Investment Officer, Mr Anil Ahuja, is Dhaval’s childhood friend from school and IIT Delhi and, being an ex-employee of Citibank, JP Morgan and 3i Group plc, had many decades of a strong investing career.
"The fact that these were the drivers of the investment decision is borne out by the fact that when, in 2018, Mr Ahuja, left his position as CIO of the fund, we redeemed the investment in that fund," a statement read.
As confirmed by Mr. Ahuja, at no point in time did the fund invest in any bond, equity, or derivative of any Adani group company, the statement said.
As far as the other allegations including Dhaval's appointment in unrelated job profile in asset manager Blackstone, they added: "Dhaval’s appointment, in 2019, as Senior Advisor to Blackstone Private Equity was on account of his deep expertise in Supply Chain management. Thus his appointment pre-dates Madhabi’s appointment as SEBI Chairperson. This appointment has been in the public domain ever since. At no time has Dhaval been associated with the Real Estate side of Blackstone."
"On his appointment, the Blackstone Group was immediately added to Madhabi’s recusal list maintained with SEBI. Over the last two years, SEBI has issued more than 300 circulars (including “Ease of Doing Business” initiatives in line with the developmental mandate of SEBI) across the entire market eco-system. All regulations of SEBI are approved by its Board (and not by its Chairperson) after extensive public consultation. Insinuations that a handful of these matters related to the REIT industry were favours to any specific party are malicious and motivated," the statement said.
Buch said SEBI has strong institutional mechanisms of disclosure and recusal norms as per the code of conduct applicable to its officers. Accordingly, all disclosures and recusals have been diligently followed, including disclosures of all securities held or subsequently transferred.
Besides, Buch said Hindenburg has been served a show cause notice for a variety of violations in India. It is unfortunate that instead of replying to the Show Cause Notice, they have chosen to attack the credibility of the SEBI and attempt character assassination of the SEBI Chairperson.