Traders cited heightened legal risk, potential compliance costs, and the possibility of fresh regulatory scrutiny as reasons for the abrupt downturn. The latest developments add pressure to a group that has faced periodic questions about its governance practices and leverage profile. The benchmark Nifty 50 Index ended the session marginally lower, but the Adani-related losses vastly outpaced the broader market.
Allegations of Bribery and Misrepresentation
The U.S. indictment alleges that from 2017 to 2020, the defendants paid more than $250 million in bribes to unnamed Indian officials to secure solar-power supply contracts that ultimately generated over $2 billion in profits. Prosecutors contend that the Adani executives simultaneously misled U.S. and international investors by portraying the conglomerate as fully compliant with anti-corruption standards while raising more than $3 billion in capital to finance those same projects.
According to the SEC, offering documents and investor presentations issued during that period emphasized rigorous internal controls and adherence to the Foreign Corrupt Practices Act. Regulators now say those statements were materially false and deprived investors of information necessary to assess legal and financial risks. The summons requests seek to compel both Gautam and Sagar Adani to produce documents and appear for depositions on U.S. soil.
International Cooperation Challenges
The SEC noted in its filing that it had repeatedly contacted Indian authorities under the Mutual Legal Assistance Treaty but had “not received adequate cooperation,” delaying service of process. By asking Judge Garaufis for permission to utilize alternative methods—such as service via counsel or electronic communication—the agency is trying to keep its civil enforcement timeline aligned with the ongoing criminal proceedings. A decision on the request could come within weeks.
Legal analysts say the SEC’s strategy reflects a broader shift toward aggressive cross-border enforcement, particularly in the energy and infrastructure sectors where multinational financing intersects with local concession awards. In a 2023 speech, SEC Chair Gary Gensler highlighted the importance of pursuing complex foreign bribery cases, an approach consistent with the agency’s history of collaboration with the U.S. Department of Justice and international bodies like the Organisation for Economic Co-operation and Development.
Company Response and Next Steps
Adani Group has not issued a detailed public statement responding to the latest court filing. The company previously denied wrongdoing after the 2024 indictment, asserting that all contracts were won through competitive bidding and that its compliance framework meets global standards. A spokesperson told media outlets at the time that the conglomerate would “vigorously defend” itself in the United States. CNBC reported on Friday that requests for additional comment had not been answered.
If the court grants the SEC’s application, the ensuing discovery process could reveal further details about internal decision-making and interactions with government officials. Under U.S. law, failure to comply with a duly issued subpoena can lead to contempt proceedings and potential monetary penalties, adding to the legal exposure already posed by the criminal indictment.
Broader Implications for Investors
The abrupt share-price decline underscores the sensitivity of Adani stocks to legal and regulatory headlines. The group’s market capitalization had partially recovered earlier this year after a separate short-seller report raised governance and accounting concerns in 2023. Friday’s sell-off renewed questions about whether the conglomerate may face higher borrowing costs or restrictions on accessing international capital markets if the SEC advances its case.
Analysts also noted that several group companies are included in global emerging-market indices tracked by large funds. Sustained weakness could prompt passive outflows, amplifying volatility. Meanwhile, rating agencies are likely to scrutinize the impact of potential fines or settlement costs on the conglomerate’s leverage ratios, especially for units with sizable capital-expenditure plans in renewable energy, ports, and logistics.
For now, the legal process remains in an early phase. Judge Garaufis must decide whether the SEC’s alternative service request meets the standards of due process. A hearing date has not been publicly set. Until a ruling is issued, the summonses cannot be formally delivered, leaving the timeline for any deposition or document production uncertain.
Crédito da imagem: Reuters
