NEW DELHI — On Wednesday, Indian businessman Gautam Adani lost the title of Asia's richest man. In early January, not only was he the richest in Asia, he was the third-richest in the world and just a few billion shy of Elon Musk. But in the past week, Adani has dropped several places on lists of the world's wealthiest people kept by Forbes and Bloomberg. In a short span of less than 10 days, his personal fortunes have plummeted by close to $50 billion while his firms hemorrhaged around $100 billion in market value.

The reason? He's been accused of "pulling the largest con in corporate history" by a U.S.-based short seller, a research firm that bets against Adani's stock prices.

On Jan. 24, Hindenburg Research released a more than 100-page report, alleging that the Adani conglomerate has "engaged in a brazen stock manipulation and accounting fraud scheme over the course of decades."

The Adani Group calls the claims "nothing but a lie."

On Wednesday, shares of the Adani Group tumbled further as Bloomberg reported that Swiss investment banking company Credit Suisse has stopped accepting the Indian conglomerate's bonds as collateral. The conglomerate, on the same day, also called off a massive $2.5 billion share sale — in a move that further raised eyebrows from investors.

Hindenburg claims it has evidence of "brazen accounting fraud, stock manipulation and money laundering at Adani." It has raised concerns over the level of debt in the group's companies and alleges that the conglomerate illegally routed money through shell companies in tax havens like Mauritius. Several of the group's top executives are members of the Adani family, the report notes, creating an environment ripe for opaque financing decisions.

The allegation that Adani stocks were overvalued didn't come as a surprise to Sonam Srivastava, founder of the Indian investment advisory firm Wright Research. But "the detailed allegations of fraud and market manipulation are pretty horrendous," she says.

"It is quite clear that Adani has had very little auditory supervision, almost no coverage by analysts and the regulator has not taken any steps to investigate their business processes or price actions."

Amol Agrawal, who teaches economics at Ahmedabad University in Gujarat, India, says the Adani episode is "a major dent on the image of the group, and reputations are very important here."

Ties with India's leadership

Adani's businesses span everything from airports and ports to coal and renewable energy and, more recently, media. The 60-year-old tycoon's meteoric rise over the past few years — about $100 billion of his previously estimated $120 billion net worth (before the scandal broke) came about in the last three years or so — coincided with the election and rise of Indian Prime Minister Narendra Modi.

Observers note that both men hail from the western Indian state of Gujarat, had humble beginnings and have been friends for many years. In 2014, the then-Prime Minister-elect Modi traveled to New Delhi for his inauguration in Adani's plane.

Hindenburg's report has brought the ties between the two men under renewed scrutiny. "Adani has pulled off this gargantuan feat with the help of enablers in government and a cottage industry of international companies that facilitate these activities. These issues of corruption permeate multiple layers of government," the report alleges.

"No smoke without fire"

Hindenburg isn't exposing the alleged scam purely as a public service, however. It holds short positions in the Adani Group, which means that Hindenburg will gain financially if Adani's shares fall. The short seller has a track record of blowing the whistle on corporate fraud around the world, from the United States to China — and profiting from its exposés. In 2022, for example, it accused Trevor Milton, founder and CEO of the electric vehicle company Nikola of making false claims to drive up its share price. Shortly afterward, Milton was found guilty in a U.S. federal court.

"Short sellers have their own games to play, just like the long buyers," says Agrawal. "But there is no smoke without fire."

Hindenburg was founded in 2017 by Nathan Anderson, a former hedge fund manager who is now among a small group of activist short sellers on Wall Street — traders who make money by shorting, or betting against, big companies. According to a 2021 New York Times profile of Anderson he's turned his passion of "finding scams" into a career.

This isn't the first time accusations of fraud have surfaced against Adani.

In 2021, Indian lawmaker Mahua Moitra, who belongs to an opposition party and used to be an investment banker, wrote to the Securities and Exchange Board of India urging an investigation into Adani's alleged use of offshore companies. "The regulators never took a stand, and the allegations died down," says Srivastava, the investment advisory firm founder.

The Adani Group has been the subject of multiple investigations by government agencies but Hindenburg says most of them have been stalled or stonewalled.

"A calculated attack on India"

Agrawal, of Ahmedabad University, also wonders why it took a research firm based in the U.S. to raise such serious questions about the Adani Group. "There are so many stock market analysts [in India], why is it that they were not seeing what these guys are seeing?" he asks.

Most market analyses today, he says, are "buy, buy, buy" and it points to a wider problem. "The stock market and the whole financialization of the world economy has moved in a direction where the only thing you want to do is to make sure that stock markets and whatever companies are trading there are constantly going up. Because if anything happens there's a whole fallout."

On Jan. 29, the Adani Group released a more than 400-page rebuttal to Hindenburg's findings, which it called "a malicious combination of selective misinformation and concealed facts." The statement also cited a conflict of interest on Hindenburg's part as a short seller, alleging that the firm had an ulterior motive.

"This is not merely an unwarranted attack on any specific company but a calculated attack on India, the independence, integrity and quality of Indian institutions, and the growth story and ambition of India," the statement said. The Adani Group said it's also considering suing Hindenburg.

Hindenburg says it welcomes any legal action and that "fraud cannot be obfuscated by nationalism."

"We believe India is a vibrant democracy and an emerging superpower with an exciting future. We also believe India's future is being held back by the Adani Group, which has draped itself in the Indian flag while systematically looting the nation," Hindenburg responded.

On Tuesday, Indian newspaper Mint reported that the Adani Group was planning an independent audit of its eight listed firms. India's securities regulator is also increasing scrutiny of Adani's deals, according to Reuters.

The fallout from the Hindenburg report came amid Adani's crucial $2.5 billion follow-on public offer, or secondary share sale, which got a muted response from retail investors but was backed by investors like the Abu Dhabi International Holding Co. It sailed through on Tuesday with full subscription but the conglomerate withdrew it the next day, citing market volatility. "It wouldn't be morally correct to proceed," Adani told investors Thursday.

Agrawal says whether the Adani allegations would have broader implications for India's reputation remains to be seen.

"If this is a one-off case, and it's quickly figured out, then fine, it will not dent India's image," he says. "But if these governance problems and so on are not just limited to one group, and if it's a larger phenomenon, then there will be some backlash in the sense that [investors] might withdraw funds."