The Adani Group is facing fresh allegations of money laundering and stock manipulation from US short-seller Hindenburg Research, leading to a notable drop in its share prices on Friday.

This time, the action is unfolding in Switzerland. Hindenburg claims that Swiss prosecutors have frozen more than $310 million in funds held at five Swiss banks allegedly linked to a key figure acting as a “frontman” for the Adani conglomerate.

The Adani Group headed by billionaire Gautam Adani has branded the accusations “clearly preposterous, irrational and absurd,” and called them yet another attempt to harm its reputation and market value.

But the allegations have rattled investors with the majority of Adani group shares ending the day in the red on Friday. Among them, Adani Power slid nearly 3 per cent while Adani Energy Solutions fell more than 2.4 per cent.

According to Hindenberg, which referred to a Swiss court decision rejecting an appeal to unfreeze the sequestered funds, Swiss authorities have been investigating the Indian conglomerate for alleged money laundering since December 2021.

The court documents do not directly name Adani Group. But Hindenburg linked the court case to the conglomerate based on the funds’ virtually exclusive investments in Adani group company shares.

The investigation was triggered when Swiss financial authorities flagged suspicious activity related to a company linked to Adani’s alleged frontman. A total of four “suspicious activity reports” were filed, leading to the freezing of more than $310 million.

Hindenburg alleges that the group, using the frontman, funnelled money illegally through offshore funds in the British Virgin Islands, Mauritius and Bermuda to evade Indian regulations.

Hindenburg claims Swiss authorities believe that the offshore funds may have been used to conceal ownership stakes in publicly traded companies. The aim of the alleged scheme was to allow the group to avoid India’s 75 per cent cap on ownership stakes in listed firms.

Swiss prosecutors are investigating whether the large sums entrusted to the frontman were possibly invested in Adani’s listed companies to artificially inflate their value, according to the court ruling 20240807_BB_2024_46.pdf at weblaw.ch. [EXTERNAL LINK]: https://www2.weblaw.ch/

In response, the Adani Group said in its statement Friday it has “no involvement in any Swiss court proceedings, nor have any of our company accounts been subject to sequestration by any authority”.

The case was initially opened by the Geneva Prosecutor’s Office and has since been taken over by the Swiss Federal Prosecutor’s Office. Both offices have refused to comment on the investigation.

But the latest allegations involving the Advani Group don’t end there. According to the court’s ruling, the alleged frontman may not be the actual owner of the money frozen in the Swiss bank accounts.

Instead, the judgment says that Swiss prosecutors suspect he is a middleman, helping to hide the group’s involvement in the supposed scheme to evade the scrutiny of Indian authorities.

“It should be noted that the appellant is clearly unable to provide… the explanations – supported by evidence – that it should easily be able to provide to dispel the legitimate doubts raised, which could potentially eliminate the accusations leading to the seizure measures or, at least, advance the ongoing investigation more quickly,” the Swiss court said in its ruling.

The Adani Group said the Hindenburg claims are “yet another orchestrated and egregious attempt by the same cohorts acting in unison to inflict irreversible damage on our group's reputation and market value”.

In early 2023, the US short-seller issued a bombshell report accusing the Adani Group of inflating its stock prices, money laundering and accounting fraud. Those allegations, strongly denied by the group, wiped $100 billion off the market value of the conglomerate’s publicly listed firms. Adani stocks have since clawed back much of their lost value. The start of the Swiss investigation preceded the release of the Hindenburg report.

There could also be trouble brewing in the US over reports that surfaced earlier in the year that the Department of Justice is investigating the Adani Group for possible bribery. However, the group says it has received no notice from US authorities and declares it operates “with the highest standards of governance” and is in full compliance with anti-bribery laws.

All eyes now will be on how the group’s stocks perform Monday when financial markets reopen.