The US-based short seller Hindenburg Research, which received a 46-page show cause notice from Sebi, claimed that the markets regulator identified "zero factual inaccuracies" with its Adani research that wiped $150 billion off Adani group shares in 2023. It criticised Sebi saying the regulator instead took issue with things like Hindenburg's use of the word 'scandal' when describing what it says were "multiple prior instances of Adani promoters being charged with fraud by Indian regulators; and its quoting of an individual that alleged Sebi is corrupt and works “hand in glove" With conglomerates like Adani to help it skirt regulations.

It continued: "After 1.5 years of investigation, and undoubtedly countless hours and personnel examining every letter of our 106-page report, Sebi then detailed the supposed inaccurate statements it found."

Hindenburg Research jotted down its response in five statements:

In the first point, it argued that its Adani report detailed how a Directorate of Revenue Intelligence (DRI) investigation found Adani had engaged in circular trading of diamonds, earning Rs 680 crore (US $151 million) in illicit export credits. Hindenburg Research claimed it then described how CESTAT, the tribunal that handled appeals, dismissed the findings, effectively ignoring the earlier DRI conclusions.

"Sebi did not allege any aspect of our description was false. Rather, it argued that CESTAT looked at the earlier case and alleged that we “sensationalized or distorted certain facts” by using the word “scandal” to describe the prior alleged INR 6.8 billion scheme by Adani that resulted in a 239-page order from the Commissioner of Customs detailing evidence of fraud, an INR 250 million (U.S. $4.6 million) fine, and extensive subsequent legal proceedings," Hindenburg said.

Hindenburg Research said that Sebi argued it “cherry-picked facts” by omitting that the Supreme Court later declined to take up the case on appeal, which it says was "a completely irrelevant piece of information that in no way alters any aspect of our findings."

In the second statement, Hindenburg Research mentioned that a 2007 Sebi ruling alleging that promoters of Adani worked with Ketan Parekh, perhaps India’s most notorious stock market manipulator, to manipulate shares in Adani.

"Our report explained how Adani Group entities initially received bans for their roles, but these were later reduced to token fines. Once again, SEBI did not allege any aspect of this was false. Rather, Sebi claimed that it was a misrepresentation to call the reduction in punishment “leniency.” Note that the Cambridge dictionary definition of “leniency” is “treatment in which someone is punished or judged less strongly or severely than would be expected," it said.

Thirdly, Hindenburg Research alleged an apparently offended Sebi also claimed its report was not false, but rather “reckless” for quoting a banned broker with specific experience dealing with Sebi who detailed "how the regulator was fully aware that firms like Adani used complex offshore entities to flout rules on minimum public shareholder ownership, and that the regulator participated in the schemes due to bribes."

Hindenburg Research said Sebi called the source 'unreliable' as a banned broker. "Note that the sole reason SEBI is aware that the broker was banned is because we volunteered this information up front, writing in our report that the broker was banned in order to give readers the transparency and context needed to make their own judgements on the statements," Hindenburg said.

Sebi, it said, claimed that “such statements affect market integrity by shaking the trust of investors in the regulatory framework.”

"We can’t help but wonder if protecting perpetrators of fraud while attacking those who expose it shakes the trust of investors in the regulatory framework far more than our accurate and fully-contextualized quoting of a source," it said.

In the fourth statement, Hindenburg said the remaining issues highlighted by Sebi had nothing to do with the content of its research and were instead focused on technical elements of its disclaimer.

"For example, SEBI took issue with our disclaimer that fairly described how we were short Adani—through a deal with an investor partner who was indirectly short Adani derivatives through a non-Indian, offshore fund structure," it said.

Finally, in an alleged misreading of Adani report’s disclaimer, Hindenburg said Sebi noted that it was falsely “claiming objectivity” when Hindenburg wrote that information in the report is “presented ‘as is,’ without warranty of any kind, whether express or implied…”

"Far from “claiming objectivity,” the very disclaimer language cited by Sebi was explicitly a lack of a claim—stating that we made no assurances to quality or other features of the information. In fact, we disclosed a short position in the very first line of our report and prominently again at the end in big bold letters so readers could weigh the potential for bias given that we stood to benefit from a decline in Adani shares. We then encouraged every reader to do their own research," it said.

Hindenburg claimed that since its initial report, "at least 40 independent media investigations have corroborated and expounded on its findings or have uncovered new issues of suspected fraud or malfeasance at Adani that its research stood the test of Sebi's investigation shouldn’t be a surprise."