SEBI Begins Hearings To Recover $22.25 Million Gains Linked To Adani-Hindenburg Short-Selling Case

India’s markets regulator Securities and Exchange Board of India (SEBI) has begun hearings in a case involving alleged gains from trades carried out before Hindenburg Research released its critical report on the Adani Group in 2023, Reuters reported.

The regulator is seeking recovery of profits that it believes were generated through trades based on non-public information. The proceedings involve overseas entities, including Kingdon Capital Management and a Mauritius-based fund linked to Kotak International.

SEBI investigates Adani-related short positions

SEBI had stated in 2024 that Kingdon Capital created short positions in Adani Group stocks through the Mauritius-based K India Opportunities Fund Class F before Hindenburg published its report.

Short selling involves borrowing shares, selling them in the market and later buying them back at a lower price to profit from a fall in value.

Hindenburg’s January 2023 report alleged that the Adani Group had violated securities regulations and raised concerns over stock manipulation.

The report triggered a sharp decline in Adani Group shares, resulting in a significant fall in market value. The conglomerate denied the allegations.

SEBI later rejected Hindenburg’s claims of stock manipulation against the group. However, the regulator said six entities benefited from short-selling transactions and estimated the gains at $22.25 million.

Regulator seeks overseas asset recovery

The case has gained attention as one of SEBI’s major efforts to pursue foreign entities and recover assets located overseas. The regulator is arguing that although the parties involved are based outside India, the trades were executed in Indian markets, giving it jurisdiction.

According to people familiar with the matter, personal hearings began more than two years after the initial proceedings as the involved parties took time to respond.

SEBI has also opposed insolvency proceedings involving the Mauritius-based fund used for the transactions. The regulator has asked authorities to prevent the transfer or distribution of fund assets until recovery proceedings are completed.

Following the insolvency process, Mauritius’ Supreme Court appointed the managing director of restructuring firm Quantuma as a receiver in June to oversee and safeguard the fund’s assets.