In late November of last year, the U.S. Attorney’s Office for the Eastern District of New York indicted Adani Group Chairman Gautam Adani, founder of one of India’s biggest companies, on securities and wire fraud charges concerning the sale of certain bonds. The alleged “fraud” was related to the failure to disclose an alleged scheme to bribe regional government officials in India—a scheme that has virtually nothing to do with the United States. There are no victims of the alleged fraud. All investors have been fully paid on their investments to date.
In addition to potential damage to Adani and the Adani Group, the 11th-hour indictment harms relationsbetween the U.S. and India at a time when the U.S. needs India as a counter-balance to China. It sends exactly the wrong signal to the international companies that invest billions of dollars in the U.S. and employ tens of thousands of Americans. It also has the potential to cripple the U.S. dollar’s status as the world’s global reserve currency. The indictment has the hallmarks of “lawfare” – a case that is brought against an individual or entity that is meant to intimidate or hinder.
Adani, who is fighting what he calls the “baseless” charges, rose from a modest mercantile family to become one of Asia’s richest people. He founded the Adani Group in 1988 as a commodities-trading firm. It has grown to become a $200 billion conglomerate that includes ten publicly traded companies specializing in ports, airports, power generation and transmission and green energy. The Adani Group is the de facto infrastructure builder of India.
The DOJ case against the Adani Group comes at a critical time in the U.S.-India relationship. Prime Minister Narendra Modi and President Trump built a warm relationship during Trump’s first administration, and Modi is likely to come to the U.S. soon. As China’s adversarial relationship with the U.S. continues, and Beijing’s increasing gravitation toward Moscow escalates, the U.S. needs India as a friend in the region.
During his first term, Trump revived the Quadrilateral Security Dialogue (Quad) with India, Japan and Australia to counter China militarily and diplomatically through the Indo-Pacific. Trump wants and needs to expand strong relations with Delhi – this is crucial to American national security.
India is also key to American economic security. Indian companies have invested more than $40 billion in the U.S. and employ more than 425,000 workers here, according to a 2023 Confederation of Indian Industry report. Indian companies invest in all 50 states and the District of Columbia.
But now, former President Biden’s DOJ has handed the Trump administration a criminal case involving one of the most important companies in a country that is critical to the Indo-Pacific’s stability and prosperity. The indictment was announced two weeks after Trump’s re-election. It’s awkward to say the least; politically damaging to bilateral relations, at the worst.
There is another point about this case that should not be overlooked: Potential peril to the dollar’s global dominance. The U.S. dollar is the world’s reserve currency for a reason – it is backed by the strongest, richest country in the history of the world. But it’s not invulnerable. China and Russia are leading BRICS nations in de-dollarization efforts. Brazil and China abandoned the dollar as an intermediary and now trade in each other’s currencies. If the only requirement for U.S. law enforcement officials to extend their long arms around the globe is that a transaction is conducted in dollars, or has some technical, tenuous connection to the U.S., it will disincentivize every party – including law-abiding ones – from using the dollar.
Because of the Adani Group’s size and reach, it has become a target of rivals inside and outside of India. In 2023, U.S. short seller Hindenburg Research questioned the Adani Group’s financial footing, prompting a large sell-off of company shares. The company fought back with an extensive response, and called the report a “malicious combination of selective misinformation and stale, baseless and discredited allegations.” Investors agreed, as company shares quickly recovered.
The Indian government questioned Hindenburg’s motives. In July of last year, India’s securities regulator, the Securities and Exchange Board of India, alleged that Hindenburg gave an asset manager client access to a Hindenburg report on the Adani Group before it was made public, to set up a short bet against the Group. One Indian lawmaker called on the government to probe whether Chinese interests were behind the attacks on Adani, as the conglomerate outbid Chinese rivals to win the Port of Haifa in Israel in early 2023, several months before the Hindenburg report. More recently, Hindenburg itself has gone out of business.
Adani investors responded to the DOJ allegations as they did to the Hindenburg report. Shares of Adani Green Energy, the company at the heart of the DOJ case, rallied 20 percent in the days following the company’s refutation of the indictment.
The Eastern District of New York has a history of exhibiting prosecutorial zeal while trying to police the world. It notably failed in 2019, when a jury took only five hours to acquit a defendant who suffered nine months of imprisonment before a six-week trial that called into question the extraterritorial reach of statutes related to financial crimes.
It should not take a lengthy trial and months of reputational damage for a similar outcome to be reached for Gautam Adani. The case against him is a case against the American national interest.
Duggan Flanakin is a senior policy analyst at the Committee For A Constructive Tomorrow who writes on a wide variety of public policy issues.
