India’s second-richest person charged in US fraud case

Billionaire Gautam Adani, the founder and chairman of Indian conglomerate Adani Group, was charged by US prosecutors on Wednesday in an alleged extensive fraud scheme. The charges could shake up one of India’s biggest businesses and damage Indian Prime Minister Modi as well.

But first, some context… 

The Adani Group is a multinational corporation headquartered in Ahmedabad, India,with businesses spanning pretty much every critical sector. It’s a major defence contractor, a top producer of thermal coal power, and India’s biggest private airport and port operator.

The group even owns professional cricket teams, which in India is arguably the most critical industry.

Adani has leveraged his business interests to become a close ally of Indian Prime Minister Narendra Modi and his Bharatiya Janata Party (BJP). When Modi was first elected in 2014, he flew to New Delhi in Adani’s private jet. 

But more than being eye-wateringly rich — Adani is the second-richest person in Asia with $85.5B, second only to fellow Indian Mukesh Ambani who has a whopping $117.1B — Adani’s success is also a source of national pride for many Indians.

What exactly is Adani accused of doing? 

Adani and seven others (including his nephew Sagar Adani, an executive director of Adani’s green energy business) are accused of paying or promising to pay bribes to Indian officials totalling $250M in exchange for lucrative solar energy supply contracts worth more than $2B in revenue over 20 years. 

The reason the US is involved is because the Adani Group allegedly turned around and raised billions of dollars from US banks and investors, “on the basis of false and misleading statements,” and in contravention of the US’ anti-bribery compliance programs.

Prosecutors allege the accused “extensively documented their corrupt efforts” on mobile phones, PowerPoint presentations, and Excel spreadsheets. Because crime is one thing, but disorganised crime is another thing entirely.

The Adani Group released a statement yesterday afternoon denying the accusations and calling them “baseless”.

Here’s the intrigue…

First, there’s a good old-fashioned whodunnit at the core of the case. The indictment repeatedly mentions two unnamed “co-conspirators” who helped build the case against Adani.

Indian newspaper The Economic Times has been on the case, sleuthing its way to naming two senior businessmen as potential collaborators. One of them, the paper alleges, was a senior adviser to UK Prime Minister John Major in the early 90s.

Second, it’s not clear what happens now to Adani and his company. Our finance-loving readers might remember last year the Adani Group had the misfortune of falling into the crosshairs of the infamous Wall Street short-selling activist investor, Hindenburg Research.

Hindenburg didn’t mince words, accusing Gautam Adani of running “the largest con in corporate history”. While Adani spent much of 2023 and early 2024 trying to restore investor confidence and repair the reputational damage, this week’s charges sent shares in Adani Enterprises tumbling another 20%.

Finally, in case you’re wondering, the US and India do have an extradition treaty (if found guilty, Adani would qualify given the severity of the charges), but we don’t think Asia’s second-richest person is likely to be dragged before a US judge anytime soon.

INTRIGUE’S TAKE

A penny for Prime Minister Modi’s thoughts today. His party significantly underperformed in June’s election and his personal approval rating dipped below 50% for the first time in recent memory. Opposition leader Rahul Gandhi is already calling for Modi to explain his relationship with Adani.

With that said, we think Modi will weather this storm relatively easily. His party has already downplayed the news and is questioning the “timing” of the DOJ’s charges.

We also don’t expect US-India relations to be damaged, mostly because both countries have far bigger fish to fry. The US-India relationship has become too strategically vital in terms of supply chains, global governance, tech exchange, and countering China to derail over one (allegedly) corrupt businessman.

If anything, the US-India relationship could strengthen under Trump’s presidency. His pick for national security advisor, Congressman Mike Waltz, is the co-chair of the India Caucus and has long pushed for closer US ties with New Delhi to counter Beijing.

For his part, Adani likely saw all this coming, having deftly buttered up Trump with flowery praise after his election, calling him, “the embodiment of unbreakable tenacity, unshakeable grit, [and] relentless determination”.

Also worth noting: 

• Kenya cancelled two major deals involving the Adani group shortly after the US announced its charges.
• The US Securities and Exchange Commission filed separate civil fraud charges on Wednesday.