July 1 (Reuters) -

Hindenburg Research refuted allegations on Monday from

India's securities regulator accusing the company of colluding

with a U.S. asset manager to use non-public information to set

up its short bet against Adani Group last year.

In a statement posted to its website, U.S.-based

short-seller Hindenburg provided a copy of a 46-page show cause

notice from the Securities and Exchange Board of India (SEBI)

outlining the allegations that six entities including

Hindenburg, asset manager Kingdon Capital Management and a

Mauritus-based trading fund set up by Kotak Mahindra Bank

violated certain rules under the Prevention of Fraud and Unfair

Trade Practices regulation.

While SEBI has not made the notice public, two sources

at the regulator with direct knowledge of the matter confirmed

its authenticity.

The allegations, if proven, could result in monetary

penalties and the payback of any illegal gains.

Hindenburg responded saying the notice is "nonsense" and

an attempt to silence and intimidate by alleging that

Hindenburg's report contained misrepresentations and inaccurate

statements meant to mislead readers.

"In our view, SEBI has neglected its responsibility,

seemingly doing more to protect those perpetrating fraud than to

protect the investors being victimized by it," Hindenburg said.

The disclosure of the SEBI notice adds a new twist in

the saga that began last year when Hindenburg, founded by Nathan

Anderson, alleged improper business dealings by Adani.

Adani, which refuted the allegations, suffered a loss of as

much as $150 billion in combined market value after the report,

but has since rebounded.

In the notice, SEBI alleges Hindenburg colluded with its

client Kingdon Capital Management by providing a draft of its

report on Adani Group before it was released publicly.

SEBI alleges that Mark Kingdon, the owner of Kingdon

Capital, then set up a fund able to trade Indian equities known

as K Indian Opportunities Fund. That fund created short

positions in Adani group stocks between Jan. 10, 2023, and Jan.

20, 2023, five days ahead of the Hindenburg report being

published, according to the SEBI documents.

In its statement, Hindenburg said a Mauritius registered

unit of Kotak Mahindra Bank, an Indian firm, created and oversaw

an offshore fund structure that was used by its "investor

partner" to bet against Adani's shares.

The positions were squared off in February, leading to

gains of $22.25 million, the SEBI documents said.

Hindenburg in its statement does not comment on its

relationship with Kingdon.

An email to Hindenburg Research and Kingdon Capital was

not immediately answered.

SEBI has not replied to a request for comment on

Hindenburg's statement and to confirm the authenticity of the

show cause order.

Kotak did not reply to a request for comment.

Hindenburg's response sheds some light on the mechanics

of its Adani short trade, the details of which intrigued other

investors because Indian securities rules make it hard for

foreigners to bet against companies there.

Hindenburg said it made $4.1 million in gross revenue

through "gains related to Adani shorts from that investor

relationship" and just $31,000 through its short position of

Adani's U.S. bonds. It did not name the investor.

"It was a tiny position," it said. "But, to date, our

research on Adani is by far the work we are most proud of."