US short seller Hindenburg Research, which had rocked the Adani Group with allegations of stock market manipulation and accounting fraud, on Tuesday said it has received a show cause notice from Indian capital market regulator SEBI over alleged violations in placing bets on the conglomerate stocks.

Hindenburg termed the show cause notice as “nonsense” and “concocted to serve a pre-ordained purpose: an attempt to silence and intimidate those who expose corruption and fraud perpetrated by the most powerful individuals in India.”

The New York-based firm, in a statement, said it had while putting out the report that alleged “brazen stock manipulation and accounting fraud scheme over the course of decades” at the Adani group, disclosed that it was short on Adani (meaning it had anticipated a fall in the value of stock and thus traded on it).

It disclosed that Kotak Bank created and oversaw an offshore fund structure that was used by its “investor partner” to be against the conglomerate but hastened to add that it may “barely come out above breakeven” on its trade.

Without disclosing the name of the investor, Hindenburg said it made USD 4.1 million in gross revenue through “gains related to Adani shorts from that investor relationship” and just USD 31,000 through its short position of the conglomerate’s US bonds.

Adani group has repeatedly denied all allegations.

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“After 1.5 years of investigation, SEBI identified zero factual inaccuracies with our Adani research. Instead, the regulator took issue with things like our use of the word ‘scandal’ when describing multiple prior instances of Adani promoters being charged with fraud by Indian regulators, and our quoting of an individual that alleged SEBI is corrupt and works ‘hand in glove’. “with conglomerates like Adani to help it skirt regulations,” it said.

The US firm said the show cause notice does resolve some questions: “Did Hindenburg work with dozens of firms to short Adani, making hundreds of millions of dollars? No – We had one investor partner, and net of costs we may barely come out above breakeven on our Adani short.

“Our work on Adani was never justifiable from a financial or personal safety perspective, but it is by far the work we are most proud of,” it said.

Hindenburg said it received an email from SEBI on June 27 and later a show cause notice outlining suspected violations of Indian regulations.

“To this day, Adani has still failed to address the allegations in our report, instead providing a response that ignored every key issue we raised and has offered blanket denials of subsequent media allegations,” it said, adding that its January 2023 report had ” provided evidence of a vast network of offshore shell entities controlled by (group chairman) Gautam Adani’s brother, Vinod Adani, and close associates.” “We detailed how billions were surreptitiously moved through these entities, into and out of Adani public and private entities, often without related-party disclosures,” it said.

On the SEBI notice, it said, “Much of the notice seemed designed to imply that our legal and disclosed investment stance was something secret or insidious, or to advance novel legal arguments claiming jurisdiction over us. Note that we are a US-based research firm with zero Indian entities, employees, consultants or operations.” The regulator, it said, claimed that the disclaimers in the report were misleading because the firm was “indirectly participating in the Indian securities market.” “This wasn’t a mystery, virtually everyone on earth knew we were short Adani because we prominently and repeatedly disclosed it,” it said.

The SEBI notice did not “conspicuously” name Kotak Bank with which Hindenburg has ties with.

“We suspect SEBI’s lack of mention of Kotak or any other Kotak board member may be meant to protect yet another powerful Indian businessman from the prospect of scrutiny, a role SEBI seems to embrace,” Hindenburg said.