Can Hindenburg take down Asia’s richest man?

Two scoops to start: First, Morgan Stanley has hit bankers with financial penalties running up to more than $1mn per employee for conducting official business on WhatsApp and other messaging platforms.

Next, Apollo Global Management has partnered with former SoftBank executive Marcelo Claure to explore a takeover of Millicom International Cellular that could value the Latin American telecoms company at almost $10bn, including debt, according to people familiar with the matter.

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In today’s newsletter:

Hindenburg sets its sights on Gautam Adani

Whatever the opposite of rolling out the red carpet is, that’s exactly what Hindenburg Research just did for the richest man in Asia.

The short seller published a report on Wednesday morning alleging decades of stock price manipulation and accounting fraud at Adani Group, the sprawling Indian industrial conglomerate controlled by billionaire business magnate Gautam Adani. (In case you missed it, our FT colleagues interviewed him in December.)

By the time markets closed in Mumbai, almost $11bn had been knocked off the market value of stocks tied to the group run by Adani — currently ranked the fourth-richest man in the world by Bloomberg, which estimates his net worth at about $118bn.

Gautam Adani’s conglomerate is rapidly expanding across different sectors, including defence and data © Bloomberg

Most DD readers are probably familiar with Hindenburg. The firm launched by Nathan Anderson burst on the scene in summer 2020 with a report alleging electric vehicle start-up Nikola was an “intricate fraud”. That report triggered an investigation into the company and its founder Trevor Milton, who was convicted of fraud last year.

The timing of Hindenburg’s report wasn’t lost on anyone keeping track of India’s capital markets calendar: Adani Enterprises, the flagship listing of the rapidly expanding business, will kick off a follow-on share offer meant to raise as much as Rs200bn ($2.5bn) on Friday.

Jugeshinder Singh, Adani Group’s chief financial officer, said the conglomerate was “shocked” by the Hindenburg report, calling it “a malicious combination of selective misinformation and stale, baseless and discredited allegations”.

The release of the report on Wednesday, he said, was intended to “undermine the Adani Group’s reputation” and damage demand for the upcoming share sale from Adani Enterprises.

That follow-on offering from Adani’s flagship listing is in part meant to address concerns raised by analysts over the company’s limited free float, after its share price gained more than 3,300 per cent in three years.

The shareholdings of several Mauritius-based investment funds in Adani Enterprises and other listed Adani Group companies — also featured in the report — have previously come under scrutiny from Indian regulators.

In Lex’s view, the high valuations and opaque earnings visibility of Adani’s companies leave much to the imagination for investors.

Adani, for his part, has always maintained his companies’ valuations are justified. In December, the billionaire businessman told the FT that some analysts “have not understood [his businesses] in real terms”.

“Who understands are my lenders, my banks, my global investors. Every time Adani comes into the market, they love to invest. And that’s how we are continuously growing,” he said.

The share sale launching on Friday will put that narrative to the test. Books close on Tuesday, January 31.

How Sullivan & Cromwell fell into the FTX ‘dumpster fire’

At the button-upped Sullivan & Cromwell headquarters in lower Manhattan, Sam Bankman-Fried must have stood out.

In happier days, the crypto tycoon stopped by at least once to work out of the law firm’s office in New York City. Last week the spiffy Sullivan won court approval to represent FTX in its messy bankruptcy case, an assignment that could net it tens of millions of dollars in fees.

Montage of Sam Bankman-Fried, FTX logo and a Sullivan & Cromwell sign
Sam Bankman-Fried’s relationship with Sullivan & Cromwell soured as the extent of FTX’s collapse became clear © FT montage: Bloomberg/Reuters

Sullivan was hired quickly when FTX collapsed in early November because of its bankruptcy, regulatory and investigative expertise . . . and because it was first on the scene, which even John Ray III, the new FTX boss, has admitted in court papers.

The firm is top-notch in all the areas needed to get money back to stranded FTX account holders. But questions remain, DD’s Sujeet Indap and the FT’s Josh Oliver report, over just what Sullivan knew about FTX’s financial condition . . . and when they knew it.

The Sullivan retention — which would allow it to bill the FTX bankruptcy estate for its $2,000-per-hour lawyers — required the law firm to prove that its previous work for FTX would not affect the case.

Critics of the arrangement have called out Sullivan’s more than 20 past assignments for FTX. As one account holder put it: “Sullivan & Cromwell’s own involvement in the FTX Group’s spending binge must be investigated and may result in liability.”

Also of note: a top FTX lawyer, Ryne Miller, joined the crypto exchange in 2021 straight from Sullivan, something the firm failed to flag in its first application.

Sullivan has maintained that its past work for FTX was relatively minor, and didn’t involve much interaction with the curly-haired boss himself.

Had the firm worked on raising capital for FTX, said one person familiar with their work, it might have stood a better chance of uncovering red flags sooner because it would have had to share company details with possible investors.

Bar chart of Profits per equity partner in 2022 ($mn) showing Sullivan & Cromwell reaped $6.4mn in profits per equity partner last year

Lawyers and bankers are always on the lookout for their next lucrative client. Sullivan had historically been cautious towards crypto. But when the industry’s golden child SBF came knocking, the potential business was interesting enough for it to veer from its typical Wall Street clientele.

“Gatekeepers”, including lawyers, “should have seriously questioned the operational environment at FTX in the lead-up to its meltdown,” CFTC commissioner Christy Goldsmith Romero said in a speech last week.

Sullivan must now sort through the FTX “dumpster fire”, as Ray has coined it, without getting burnt.

This week’s Murdoch M&A: what you might’ve missed

Rupert Murdoch made headlines in many of his own newspapers on Tuesday when he abandoned a hotly contested bid to reunite the two halves of his media empire, News Corp and Fox.

While opposing shareholders breathe sighs of relief, the nonagenarian media baron has been busy behind the scenes orchestrating another major deal: News Corp is in advanced talks to sell its 80 per cent share of online real estate business Move to rival CoStar, three people briefed on the negotiations told the FT.

Rupert Murdoch
The ‘special committees’ established to explore the terms of Rupert Murdoch’s proposal to combine Fox and News Corp will be disbanded immediately © REUTERS

The stake in Move, which operates in the US among other property websites, is valued in the “low billions” of dollars, the people added.

News Corp paid $950mn for Move in 2014, but a sale could fetch far more.

Here’s why it matters: a sale of the Move stake would be significant enough in size to have changed the calculus for the committees evaluating the proposed Fox/News Corp deal, one of the people said.

If and when that deal materialises, it would clear an easier path for Murdoch to pull off a News Corp/Fox merger once the fate of his real estate portfolio is sorted.

Job moves

  • Gabriel Aractingi, Goldman Sachs’ head of wealth management business for the Middle East and north Africa, has left after less than two years, according to Bloomberg.

  • Ira Sorkin, who served as Bernard Madoff’s lead criminal defence lawyer, has been hired to represent Aurelien Michel — the 24-year-old Frenchman charged in the US with defrauding buyers of his “Mutant Ape Planet” non-fungible tokens, per Bloomberg.

  • Jones Day has hired David Nahmias, former chief justice of the Supreme Court of Georgia, and deputy assistant attorney-general for the criminal division of the US Department of Justice, as a partner in Atlanta.

  • Herbert Smith Freehills has hired Ambarish Dash as a finance partner, based in London. He joins from Kirkland & Ellis.

Smart reads

Friends in high places Russian entrepreneur-turned warlord Yevgeny Prigozhin has had help running his private mercenary operation which has supported dictators around the world; prominent law firms have helped keep western governments from meddling in his operations, an FT investigation reveals.

More than just a pay gap A key obstacle to tackling gender wealth inequality in Japan? The stark absence of women in leadership positions. Nikkei Asia digs into the country’s deep-rooted gender problem.

Bankrolling diversity The billionaire family behind one of the biggest black-owned fortunes in the US has a plan for creating more racially diverse entertainment: targeting their ultra-wealthy peers, Bloomberg reports.

News round-up

EY auditors escape potential Wirecard sanctions after leaving profession (FT)

New York Stock Exchange blames manual error for Tuesday trading glitch (FT)

Bank of America cuts dealmaker bonuses 30 per cent as fees are squeezed (Financial News)

BNP Paribas Frankfurt office searched in cum-ex probe (Reuters)

Australian battery company signals plan to bid for Britishvolt (FT)

Music financing boom reverberates to markets (FT)

Cryptofinance — Scott Chipolina filters out the noise of the global cryptocurrency industry. Sign up here

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