"Those With Egg On Face...": Senior Lawyer's Deep Dive Into Hindenburg Row

The whole "crony capitalism" campaign against the Adani Group has backfired, and those who celebrated the Hindenburg Research "hit job" on the Adani Group "have egg on their faces", senior lawyer Mahesh Jethmalani told NDTV.

Mr Jethmalani has also pointed to a possible Chinese hand in the short seller's "hit job" on the Adani Group, and criticised the Congress party of inexplicably behaving "with such gusto" over the matter.

"This whole campaign [against Adani Group] has backfired. Initially, it did seem to have some political fallout; it certainly had a market fallout on Adani Group firms' market cap, and retail investors took a big hit. Since then the Supreme Court clean chit has come, and Adani Group companies' shares have returned to pre-Hindenburg levels," Mr Jethmalani told NDTV.

"The only ones who have egg on their faces now are those who had taken this [Hindenburg row] up as a crony capitalism issue, and not for what it really was - a Chinese hit job on Adani Group, which was serving India's strategic interests," he said.

To a question on China's alleged hand in the Hindenburg row, Mr Jethmalani, who's also a Rajya Sabha MP from the BJP, said it would appear so [the Chinese Communist Party is targeting the Adani Group]. "The Supreme Court has given a clean chit on a complaint by a co-host of the Congress party, except for one or two matters which are pending. So this seemed to be a hit job by China," he said.

Mr Jethmalani referred to Anla Cheng, a businesswoman who is under investigation in the US for allegedly subverting US interests and promoting China's strategic interests.

"At that time I didn't know about Anla Cheng. China is extremely upset about having lost three bits, to my knowledge, of overseas projects of strategic interests - a railway line in Australia; a port in Jaffna, and a port in Haifa, Israel. That was the most important one," he said. "This hit job was in close proximity to the losing of these contracts. Why the Congress party has gotten into it with such gusto, only they can explain it," the senior lawyer told NDTV.

He said new facts have come to light after Hindenburg's response to a notice by the capital markets regulator Securities and Exchange Board of India (SEBI) became public. Hindenburg has said it was only a researcher that was given a contract by a company owned by US-based fund manager Mark E Kingdon.

A trust fund in which Mr Kingdon and his Chinese-origin wife, Anla Cheng, held 36 per cent was used in the hit job against Adani Group companies, Mr Jethmalani said.

"At the same time they also entered into an agreement with a Kotak investment outfit, which set up a special purpose vehicle KIOS (Kotak India Opportunity Fund). This was meant for starting a trading account for the couple's company... They did not wait for the [Hindenburg] report to come out before they took certain steps. So the trading account was started; money [from the family fund] was given by them," Mr Jethmalani said.

"Prima facie, a bulk of the money earned out of this - $25 million - went to the Kingdons. That doesn't seem to be the entire figure. More study is needed. SEBI may need to put more questions to Hindenburg. We don't know the entire size of the cake, but a portion of it was to go to Hindenburg. So, Hindenburg was the researcher, and the entire trading op was the couple's fund," he said.

On Kotak's role, Mr Jethmalani said the Indian bank certainly knew this was a short sell, bear-hammering transaction.

"Before the report was even made public, they had already taken short positions in Adani shares. Kotak certainly knew this was going to be a short sell trade in Adani shares. They covered the short sell after putting the margin money up, after the report was issued and shares fell. So that's how short sellers, bear-hammers make their money," Mr Jethmalani told NDTV.

"Hindenburg seems to be taking an arm's length position on the couple and their fund. Whoever among them approached Kotak Mahindra Investments Limited [KIOS was the special purpose vehicle], what we do know is that Kotak was the one who knew who were involved. Hindenburg seems to have said 'we're only the researcher for [studying] Adani companies and we were supposed to get a cut'. So they also knew it was a short sell operation. But only Kotak knew who the investors were," the senior lawyer said.

He said the Chinese-American businesswoman Anla Cheng is an extremely controversial person even in the United States. She ran SupChina [later renamed to The China Project], which was pro-China and promoted Chinese interests.

"An insider - this is where one got all the information from - Shannon Van Sant, ex employee of Cheng's company, in her sworn statement said Cheng was subverting US interests and promoting China's strategic interests. She found the entire operation to be extremely fishy, a hub of Chinese spies," Mr Jethmalani said.

After the US Congress took up the matter, SupChina morphed into another company called 'The China Project', he said, adding because of the heat it faced from the US legislature for a thorough investigation into all its operations, The China Project announced publicly they are shutting it down.