The US fund Hindenburg Research accuses billionaire Gautam Adani of the “biggest fraud in history”. The influential Indian is said to have only made it to the third richest man in the world with unfair tricks. Now his wealth is in free fall.

Few people can claim to have been richer than Jeff Bezos. Frenchman Bernard Arnault is such a person, Elon Musk is a second. A week ago, Gautam Adani, who is largely unknown in the West, was also one of them. Forbes magazine estimated his fortune at $126 billion at the end of January. Only half of that is left now. Adani’s wealth has shrunk by $56 billion in just nine days.

Behind the demise of the 60-year-old Indian is a fund at the other end of the world. The New York fund Hindenburg Research released a report Jan. 24 that the fund’s activists had been working on for two years. Tenor: Adani would deduct the “biggest fraud in history”, his economic empire was built on lies and deceit. Although the Indian denies the allegations, he has since seen the value of his Adani Group melt away.

When it comes to the richest people in the world, the name Gautam Adani is probably unknown even to those who regularly look at the top spots in the leaderboards of Forbes or Bloomberg, for example. Adani, born in 1962 in Ahmedabad in north-west India, started his career at the age of 23. He founded Adani Exports Limited, the core of today’s Adani Group. Initially he traded internationally with goods such as plastics and agricultural products, from 1991 he expanded his business to textiles and raw materials.

But the real rise began in the mid-1990s. In 1995, Adani built his own port in Mundra, near his hometown, for his trading business. The port is now the largest privately operated port in India and the largest container port on the subcontinent. A year later, he no longer just traded electricity, but began to generate it himself and built his first geothermal power plant. Today it is the largest supplier of geothermal energy in India and since 2020 also the largest solar power supplier in the country. He also owns 74 percent of Mumbai International Airport. There are also many other economic sectors in which his Adani Group is involved.

Gautam Adani has always financed the expansion of his company with large loans. Logically, the construction of ports and power plants is a high investment. Just three years ago, the Indian was hardly known outside of his home country. But then rapid expansion began. Seven Adani Group companies are listed on the stock exchange. They have all increased in price by an average of 819 percent over the past three years. For comparison: Even Elon Musk and Tesla “only” achieved 318 percent in the same period. Adani himself became around 100 billion euros richer in these three years and was listed as the third richest person in the world at the end of January.

Hindenburg Research argues that Adani swindled many of these loans. He is said to have deliberately manipulated the stock prices of his companies upwards and then used the overpriced shares as collateral for loans. The expansion of his empire is based on fraud – and that in the amount of more than 100 billion dollars. The Adani Group was worth around $218 billion prior to the Hindenburg Report. That’s about as much as SAP and Deutsche Telekom together weigh in.

Hindenburg Research states that it evaluated thousands of documents and interviewed dozens of former employees, including board members from Adani’s companies, for its 413-page report. The allegations are manifold. Gautam Adani is said to have given eight of the most important management positions to relatives who repeatedly came into conflict with the law. Most of the time it is about a network of letterbox companies with which the Adanis generate artificial sales and profits. Indian authorities therefore investigated Gautam’s younger brother Rajesh and his brother-in-law Samir 15 years ago in the diamond trade, and investigations are currently underway against his older brother Vinod.

Vinod is said to oversee a network of 38 shell companies on the island of Mauritius. These companies have no operations, but have shifted billions of dollars between the different parts of the Adani Group in recent years. There are two main allegations: First, the letterbox companies are said to have held relevant blocks of shares in the Adani subsidiaries with the aim of using them appropriately to manipulate the stock market price. Second, profits are said to have been shifted through the letterbox companies in order to beautify the balance sheets of individual parts of the company with the aim of obtaining new loans.

The Adani Group denies the massive allegations. All laws have always been obeyed. The Hindenburg Research report is an “attack on India”. Adani also regards the timing of the publication as a personal attack. The group originally planned to issue $2.5 billion worth of new bonds this week, primarily to service legacy debt. It would have been India’s largest private sector bond issue. This has now been postponed due to the uproar following the report’s release.

As indicated above, the Adani Group has been in free fall since January 24th. Gautam Adani himself has lost around $56 billion, and the value of his company has shrunk by around $86 billion. For comparison, that’s a loss equivalent to VW’s value in just one week.

In addition to the fact that there are suspicions that the empire of the third richest person in the world consists entirely of lies and deceit, there are also tangible effects outside of India. In recent years, Adani has mostly received unauthorized loans from foreign banks. Indian institutes only hold 38 percent of the group’s debt. The largest creditors, on the other hand, include the major US banks JP Morgan, Citigroup and Bank of America, UBS and Credit Suisse from Switzerland, Barclays from Great Britain and also Deutsche Bank.

These institutes are now facing a problem worth billions. Either the allegations in the Hindenburg report are correct and Adani cheated them on lending. Then the group’s debts are likely to be much higher than their financial reserves and many of the loans are in danger of defaulting, which means a huge loss for the institutions. Or the allegations are not justified, but have already triggered a massive fall in share prices. Since these shares were often deposited as collateral for the loans, there is also a risk of default in this case. Although Indian banks only provide a minority of the loans, they had to publicly announce this week that their liquidity would not be threatened in either of the two cases. Experts had otherwise feared a bank run in which normal investors withdraw their funds for fear of bank failure. That would have gotten the institutes into trouble.

The biggest beneficiary of the Adani Group scandal is Hindenburg Research, the very organization that triggered the crisis. Hindenburg sees itself as an activist fund that wants to uncover irregularities like Adani’s in order to publicly denounce such black sheep. Hindenburg is not the only investor who works in this way. The British Viceroy used the same method to bring down Wirecard, Steinhoff and the Adler Group in recent years. The activists benefit from the fact that they “short” shares beforehand. They borrow shares – in this case the Adani Group – and sell them directly. The hope is that the price will fall by the time they have to redeem the shares so that they can buy them cheaper on the redemption date. The company’s price loss is then the profit of the short seller. In its report, Hindenburg Research states that it has exactly such a short position in Adani shares, but does not name its magnitude.

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