Adani and Madoff
One of these things is not (exactly) like the other
I recently watched a documentary on the rise and fall of Bernie Madoff, who ran what was, at the time, the biggest Ponzi scheme in history, involving total claimed assets of $65 billion. I was reminded of it with the recent publication of a report from the short-selling firm Hindenburg, denouncing Gautam Adani (personal worth peaked at $150 billion) and his business empire as running ‘the largest corporate con in history’.
There is one big difference between the two cases. Until the day his sons forced him to turn himself in, Madoff was one of the most respected men on Wall Street, lionized as one the founders of the NASDAQ exchange. Although one analyst had repeatedly denounced him in terms very similar to those used by Hindenburg, he was ignored by the SEC. Media questioning of Madoff’s funds was infrequent and very cautiously worded.
When Madoff was caught, many were unwilling to believe the worst. It was suggested that he must have started out as a legitimate trader, then turned to fraud when the business ran into difficulty. In reality, it was a con from Day One.
By contrast, nothing in the Hindenburg report came as a surprise to anyone who has followed Adani. Adani’s status as a crony of, and recipient of favours from, would-be Indian dictator Rajendri Modi has been the subject of continuous criticism. The fact that the Adani group is tightly controlled by a family group, some with very dubious records is well-known. So is the opaque corporate structure, with shell companies in obscure locations. The bullying tactics he has used to silence critics like Adrian Burragubba (driven into bankruptcy) and Ben Pennings (followed by Adani spies as he took his daughter to school) have been covered extensively*. And the rickety structure of the debt-ridden house of cards that is the Adani group is there for all to see.
But until now, no one has had the resources to put all this together. Hindenburg, which has placed large bets that Adani debt will default, has put a lot of money into collecting the evidence on the sham companies Adani has set up in Mauritius, undeclared self-dealing, links with criminals and so on.
Unsurprisingly, Adani shares fell when the report was released. But a recovery might have been expected as people questioned Hindenburg’s (entirely self-interested) motives. Instead, Adani’s brief and unsatisfactory response has failed to stem the rout. The most striking point made in the response was the one I’ve already noted, that much of the information in the Hindenburg report was already public.
https://www.adani.com/-/media/Project/Adani/Invetsors/Adani%20Portfolio%20January%202023%20Global%20Call%20Short%20Seller%20Response
Modi used the same methods. He has managed to get the BBC to suppress distribution of a critical documentary. Unsurprisingly, Elon Musk turns up as an accomplice.https://time.com/6250480/bbc-modi-documentary-skirting-censors/