The Adani Group has been hit by another storm. 

Documents obtained by the Organised Crime and Corruption Reporting Project, and shared with the Guardian and the Financial Times, suggest alleged stock manipulation by four Adani companies between 2013 and 2017. The OCCRP, which is a network of investigative journalists, published a report based on these documents weeks after the Hindenburg Research report, which accused the Adani Group of running “the largest con in corporate history”.

What are the fresh allegations against Adani? Who are the people behind this alleged fraud? What has been the response of the authorities and the Adani Group?

The allegations and Adani link

First, the allegation, involving an intricate web of shell companies and funds. 

The story goes like this. Two foreign nationals Nasser Ali Shaban Ahli and Chang Chung-Ling registered four shell companies in tax havens, starting 2010. The money flowed from these four shell companies to two Mauritius-based funds – the EM Resurgent Fund and Emerging India Focus Funds. Monies from these two funds were again transferred to a broader fund, called the Global Opportunities Fund based in Bermuda. The EMRF and EIFF, within the Global Opportunities Fund, then exclusively bought shares and derivatives in four Adani companies.

You might wonder why it’s wrong for two individuals to invest in publicly listed firms. A fair question.  

Yes, it’s legal for an individual to buy or sell stocks. But according to market regulator SEBI’s rule on the shareholding pattern, a maximum of 75 percent of shares of a company can be held by promoters and directors. A minimum of 25 percent is meant for the public, called free float. 

This division in shareholding prevents artificial gain in share prices. Suppose if directors, promoters or insiders hold all shares of their company, they can create artificial demand and farcical scarcity of shares. And this is stock manipulation.

The persons of interest and the shell companies

Now let’s return to the two persons of interest here. 

Nasser Ali Shaban Ahli and Chang Chung-Ling had by 2017 bought shares worth 430 million dollars in four Adani companies. They held shares meant for the public. The Financial Times report states that Ahli and Chang had held 13 percent of shares meant for the public in three of four Adani companies.

It’s legal for Ahli and Chang to hold the free float if they are the “real public”. But they aren’t. They are instead close associates of Vinod Adani, the elder brother of Adani Group chairperson Gautam Adani. 

The two men have been directors in Adani group of companies in the past. Chang and Ahli also transferred ownership of two companies based in safe havens to Vinod in 2010.

Another link that connects Vinod with Chang and Ahli is the EM Resurgent Fund and Emerging India Focus Fund earlier mentioned in this piece. 

A subsidiary of a UAE company provided advisory services to EMRF and EIFF. You know who was the director of that company? 

It was none other than Vinod Adani. This could mean that Vinod was giving directions to Chang and Ahli on how to invest in Adani stocks. Earlier, the Hindenburg report had alleged that shell companies controlled by Vinod had manipulated share prices of some Adani companies.

If Adani had disclosed the identity of Ahli and Chang, two Adani companies – Adani Enterprises and Adani Transmission – would have breached the 75 percent threshold of promoters' shares. This could have led to delisting of at least these two firms.

An Indian Express report has further established that two offshore firms which invested in Adani stocks are linked to the Adani Group, as per records seen by the paper as part of the Pandora Papers investigation with the International Consortium of Investigative Journalists.

Ahli used Gulf Asia Trade and Investment Limited while Chang used Lingo Investment Limited. As per FT, funds from unknown sources were channelled by these two shell companies through the Emerging India Focus Funds (Mauritius) and the EM Resurgent Fund (Mauritius) under the Global Opportunities Fund (Bermuda). The Indian Express saw corporate records to point to the network through which “office-bearers and employees of Adani companies controlled these two BVI shell companies”.

The official response

What about the reaction from the market regulator SEBI?

Another surprise awaits us.

The investigation has fairly established how Ahli and Chang were Vinod’s proxies. Could this invite action from the market regulator SEBI? 

SEBI, in fact, was warned that something was amiss as early as 2014, just before the Lok Sabha Elections. But the investigation by the Directorate of Revenue Intelligence, which probes financial frauds, fizzled out after Narendra Modi became Prime Minister. We don’t need to labour the point about how close Modi and Adani are. Anyway, at the time, DRI was investigating a case of suspicious overseas investment in Adani companies.

But recently before the Supreme Court, which is hearing the Hindenburg case against Adani, SEBI did not even reveal that it had been informed by DRI about alleged stock manipulation back in 2014. The market regulator instead told the court that it began its investigation in 2020 based on complaints in the same year.

A fun fact. UK Sinha, who was SEBI chairperson from 2011 to 2017, is now part of NDTV’s board of directors – Adani group had acquired majority shareholding in NDTV in March this year. After the OCCRP report, Sinha was asked by Scroll about the DRI letter. “You should not expect me in all fairness to remember everything what happened nine years ago, given that I retired from SEBI six years ago,” he said. “I don’t recollect what the facts are.”

Meanwhile, in response to the OCCRP investigation, Adani indicated that it was just a rehash of the Hindenburg report. Thank god, this time, he did not say it was “an attack on India”. But let’s not be flippant here. Adani called the OCCRP report “suspicious, mischievous, malicious, baseless.” Are we missing any other adjective? 

Oh yes, he also called it “another attempt by Soros-funded interests”. You can read the full statement here.

Philanthropist George Soros isn’t the only donor to OCCRP. The organisation is supported by around 20 donors, including the US State Department. You can check the full list of public and private sponsors here.