NEW DELHI: The potential China connection in the Hindenburg case assumes importance given the Adani Group’s competition with Chinese interests globally.
The Hindenburg-Adani saga has taken a dramatic turn, with India’s market regulator, SEBI, issuing a 46-pages notice to Hindenburg Research. This notice is part of SEBI’s investigation into trading activities related to Adani Enterprises. The development follows Hindenburg’s critical report on the Adani Group, which was released in January of last year and has since had significant repercussions.
SEBI’s notice revealed two new players: Kingdon Capital Management LLC, a New York hedge fund, and an offshore fund structure operated by Kotak Mahindra Bank. The notice alleges that Hindenburg had exclusively shared its Adani research with Kingdon Capital before publication, with the two firms having a profit-sharing arrangement. Kingdon reportedly used Kotak Mahindra Bank for its trading.
The entire saga gained more attention after senior lawyer and Rajya Sabha member Mahesh Jethmalani, on Friday claimed that Mark Kingdon, the American businessman behind Kingdon Capital Management LLC, commissioned the Hindenburg report. Jethmalani said that Kingdon approached Kotak Mahindra Investments Limited (KMIL) to establish an offshore fund and accounts for trading Adani shares, resulting in the creation of the Kotak India Opportunity Fund (KIOF).
This fund allegedly took short positions in Adani Group shares through Mauritius before the Hindenburg report was published, with nearly $40 million provided by the Kingdon Master Fund.
The statement by Jethmalani has shifted the focus of this entire saga to Mark Kingdon and his wife, Anla Cheng. Jethmalani claimed that Cheng, a Chinese-American with a large shareholding in the Kingdon Master Fund, is a lobbyist for Chinese interests in the United States and stated that social media speculation suggests Cheng may have ties to the Chinese Communist Party (CCP), potentially implicating China in the Hindenburg affair.
Cheng, a fund manager and investor of Chinese origin, founded SupChina (later renamed The China Project) in 2016. This independent news platform covered China-related topics for Western audiences. However, The China Project faced accusations of having ties to CCP-associated groups and individuals.
Controversy arose when Shannon Van Sant, a former employee, filed a whistleblower complaint to the US Congress. Van Sant alleged that The China Project was influenced by the Chinese government and was acting as a foreign agent. This complaint was taken up by Republican Senator Marco Rubio and Rep. Chris Smith, both known for their hawkish stance on China.
The China Project denied these allegations, stating they were banned in China and labelled as “anti-China forces.” Despite their denials, the controversy led to the eventual shutdown of The China Project because of lack of funding.
The potential China connection in the Hindenburg case assumes importance given the Adani Group’s competition with Chinese interests globally. Adani has been developing projects that challenge China’s influence in various regions, something that The Sunday Guardian has revealed in the past (Targeting Adani: Questions raised on Hindenburg Research’s transparency, motive, The Sunday Guardian, January 28, 2023).
It is pertinent to mention that in Sri Lanka, Adani is developing a terminal at Colombo port, seen as a counter to China’s presence there. Similarly, in Israel, Adani operates the Haifa port, which is competing with a nearby Chinese-operated port. Also, Adani’s involvement in the proposed India-Middle East-Europe Economic Corridor (IMEEC) is viewed as a potential challenge to China’s Belt and Road Initiative (BRI).
Jethmalani suggested that the actions of Cheng and Kingdon were prompted by the Adani Group, thwarting Chinese interests in several parts of the globe, including outbidding Chinese players for the Haifa port in Israel and for coal projects near Sri Lanka’s Jaffna.
While appearing on Newx, The Sunday Guardian’s sister concern, and on “X” (formerly Twitter), the lawyer posed three key questions:
1. Who introduced the Kingdons to KMIL, what due diligence was conducted, and did KMIL participate in the short-selling as a principal?
2. Did all Indian individuals and entities assisting Hindenburg know about the short-selling plan and benefit from it?
3. Were these people and entities aware of the Chinese connection?
Hindenburg, in response to the SEBI’s notice has called it “nonsense, concocted to serve a pre-ordained purpose: an attempt to silence and intimidate those who expose corruption and fraud perpetrated by the most powerful individuals in India.”