Over the last three years, the Swiss authorities have frozen USD 311 million (Rs 2,610.7 crore) belonging to a prominent associate of the Adani group for his role in money laundering, manipulation of the group’s stocks in the Indian markets, and forgery. The Swiss investigators suspect that the associate, Taiwanese resident Chang Chung-Ling, is not the Ultimate Beneficial Owner (UBO) of the company under investigation, but is a mere front for the Adani Group. The Adani Group has however said that the court order was not linked to them and they have not been mentioned in it.  

The Swiss court order of August 9, 2024, was published on September 10, 2024, (a copy of the order is in our possession), and said the Adani Group is “suspected of engaging in illicit activities, including money laundering and embezzlement." An entity controlled by Chang Chung-Ling invested substantial amounts of money entrusted to him by the Adani Group in “opaque funds.” The order raised doubts that the funds, in reality, were controlled by the Adani Group or its directors. 

The Swiss court order, with damning implications for India’s politically influential group, has confirmed that since December 2021, Chang Chung-Ling has been under investigation in the European nation. Although Chang, the company under investigation, and the Adani Group are not explicitly named in the court order, they are identifiable through several references, including the SEBI probe and the Hindenburg report.

The Adani Group has issued a statement on reports on the court order and said, “We unequivocally reject and deny the baseless allegations presented. The Adani Group has no involvement in any Swiss court proceedings, nor have any of our company accounts been subject to sequestration by any authority. Furthermore, even in the alleged order, the Swiss court has neither mentioned our group companies, nor have we received any requests for clarification or information from any such authority or regulatory body... We have no hesitation in stating that this is yet another orchestrated and egregious attempt by the same cohorts acting in unison to inflict irreversible damage on our group’s reputation and market value.”

The Swiss investigations began more than a year before the US short-seller Hindenburg’s report accused Gautam Adani of pulling off the ‘largest con in corporate history’; and before the global investigation by OCCRP, shared with the Financial Times and the Guardian, proved how the elusive Vinod Adani (Adani Group chairperson Gautam Adani’s brother) and his two proxies — Taiwanese resident Chang Chung-Ling and UAE resident Nasser Ali Shaban Ahli — have been manipulating the Adani stocks from 2012 until at least 2018. 

The Swiss court order raises worrying questions not just about the investigations by the SEBI and its inability to make any breakthroughs, but also about the conduct of Indian institutions, including its global diplomatic and intelligence network, over the Adani Group.

The decision of the Federal Criminal Court of August 9, 2024, said the Swiss authorities formally began their investigations on December 28, 2021. The Money Laundering Reporting Office of Switzerland (MROS) filed a report with the Public Prosecutor’s Office (PPO) in Canton, Geneva against a company owned by a businessman closely associated with the Adani Group. The report was on alleged money-laundering, forgery of documents, and share price manipulation of the Adani Group. On the same day, the PPO opened criminal proceedings against the company and its Ultimate Beneficial Owner (UBO).

Between December 28, 2021 and November 17, 2023, the PPO ordered the freezing of five accounts of the particular company with five different banks with a combined balance of USD 311 million. 

Six months after the publication of the damning Hindenburg report titled “Adani Group: How the World’s Third Richest Man is Pulling the Largest Con in Corporate History”, the Swiss Federal Prosecutor’s Office (Swiss Attorney General – AG) took over the investigation from the PPO on July 20, 2023.

According to the court order, the accused company filed multiple applications with the Swiss authorities to lift the freezing of the accounts, claiming that the allegations were false and fabricated. 

In its defense, both the PPO and later the Attorney General cited their findings as well as the OCCRP investigation report, co-published by the Financial Times. The accused filed their final appeal with the PPO on March 4, 2024, which was rejected on March 11.

On March 25, 2024, the accused company filed an appeal with the Lower Appeals Chamber of the Federal Criminal Court of Switzerland, which hears Federal Criminal Appeals against the decisions of Swiss investigative agencies and the office of the Swiss Attorney General.

The appellant argued that freezing of the accounts violates the rules and principles applicable to the banking industry in Switzerland. They also claimed that for more than two and a half years, the investigations were based on newspaper articles and investigations published by journalistic organisations, which are not legitimate. They said that the agency did not do much investigation of its own, and the actions were based on third-party reports and failed to demonstrate any link between the frozen accounts and the alleged criminal act of share price manipulation of the Adani Group’s listed companies in India.

They further argued that both the PPO and the Attorney General’s office failed to establish who had been harmed by his alleged actions, and claimed that freezing his five accounts was unjustified given the lack of justification for the quantum of damage.

While dismissing the appeal on August 9, the court noted that the MROS opened the investigation against the accused on December 28, 2021 for money laundering and forgery of documents. Investigators submitted three more reports on June 1, 2022,  April 21, 2023, and November 13, 2023. In those reports, the court said, the authorities suspected that the accused is not the company's Ultimate Beneficial Owner (UBO) but merely a front for the group in India, along with some others.

The court order said that through the UBO, the accused company invested substantial amounts of money in “opaque funds” entrusted to him by the Adani Group.  

These funds, in turn, are invested in the Adani Group’s securities and shares, directly or indirectly, concealing the facts. The court added that such actions take the promoter holdings of the Adani Group’s listed companies beyond the prescribed 75% limit — in contravention of the Securities and Exchange Board of India’s (SEBI) regulations regarding stock market listed entities — resulting in artificial inflation of share prices.

Based on the documents submitted by the Swiss investigators, the court found that Chang Chung-Ling and his company often pledged these shares held in opaque funds as securities with various banks, and obtained huge sums as loans. By doing so, the appellant indulged in manipulative activities because the collaterals’ value was artificially inflated.

Citing the documents obtained by the investigators from a bank (mentioned as Bank 4 in the Column above), the court stated that the equity capital of the accused company was zero, and its only source of income was dividends from a now-dissolved Limited Liability Company (LLC). The bank documents showed that the accused had no other investors or shareholders.

Citing the Hindenburg Report, the court said that all the involved banks started their own investigations, and Bank 4’s reports are in line with the Hindenburg report findings, which alleged insider trading and stock price manipulation. The court also pointed out the close association between Chang Chung-Ling and Vinod Adani over the years, mentioned in the Hindenburg report.

Bank 4 informed the investigators that 99% of the suspect's assets were concentrated in two funds, one registered in the British Virgin Islands (BVI) and domiciled in Mauritius, and the second registered in Bermuda. The BVI-registered and Mauritius-domiciled fund’s entire portfolio comprises only Adani group securities. Later, this particular fund merged with another fund for no particular reason, which puzzled the bank’s investigators.

Between January and November 2023, all five banks filed suspected activity reports about the operations to the MROS. They highlighted the close links between the appellant’s UBO and Vinod Adani and their alleged role in money laundering and share price manipulation of the Adani Group stocks in India.

Finally, after the OCCRP investigative report on the Adani group, co-published by the Financial Times, came out, Bank 4 summoned Chang Chung-Ling again to understand his investments through the appellant company further. According to the bank, Chang refused to cooperate. The bank also reported this development to the MROS.

The Swiss AG’s office argued that the appellant’s actions violated various sections of the Swiss criminal code, which include forgery, credit fraud, and money laundering. The investigation is still underway, and many individuals, companies, and opaque funds are involved in this cross-border economic crime. As such investigations take a long time to complete, unfreezing the accounts will not be the correct choice, the Swiss AG’s office said. 

The court stated that the submission of SEBI’s show-cause notice to Hindenburg Research, and the Indian Supreme Court-appointed committee’s report, accusing the Hindenburg report and related newspaper reports of being misleading and inaccurate, can’t be taken at face value by the Swiss judicial authorities when the investigation is still underway. The court also noted that the appellant submitted these two documents “as part of an unsolicited statement of position.” According to the court, “these documents alone do not invalidate the suspicion hanging over” the appellant and its UBO, Chang Chung-Ling.

The court asked the investigating agency to submit all the relevant documents it obtained and explain its expectations regarding its pending requests for international legal assistance from various jurisdictions. 

The court dismissed Chang’s company's appeal, stating that the investigating agency has yet to ascertain the exact amount of the alleged illicit money involved. The alleged crime is very complex, involving many players and multiple jurisdictions. The court is not expecting the investigation to be completed so fast, and hence, it can’t pass an order to unfreeze the accounts.

The court ordered the appellant to pay 5,000 CHF (Swiss Franc) (Rs 4.9 lakh) as cost of the litigation.