U.K. investigators are looking into a companies controlled by industrials magnate Sanjeev Gupta and ties to Greensill. The probe is highly relevant to the implosion of Credit Suisse's supply chain funds.
The Serious Fraud Office is investigating a loosely-grouped series of companies controlled by Sanjeev Gupta and its financing arrangements with Greensill Capital, an insolvent U.K. financier, the watchdog said in a statement on Friday.
«The SFO is investigating suspected fraud, fraudulent trading and money laundering in relation to the financing and conduct of the business of companies within the Gupta Family Group Alliance (GFG), including its financing arrangements with Greensill Capital U.K. Ltd.,» the London-based anti-corruption agency said in a brief statement, noting it would not respond any further as it investigates.
Fallout From Greensill
The move represents another domino to fall in a supply chain scandal which has engulfed Credit Suisse. Gupta's companies leant heavily of financing by Greensill, which in turn provided supply chain assets for funds bundled and sold by Credit Suisse. Britain's «Financial Times» (behind paywall) last month raised questions over invoices GFG provided to Greensill in exchange for cash.
The Swiss bank pulled the plug on the $10.1 billion Greensill funds, mainly sold to its wealthy private clients, two months ago. It is grappling with the fallout from the subsequent collapse of Greensill controlled by Lex Greensill.
Delicate Swiss Question
The Australian ex-banker who has roiled Britain's establishment testified to U.K. lawmakers this week, alongside erstwhile Greensill adviser David Cameron. Greensill's collapse has kneecapped Gupta's GFG, which employs more than 30,000 people across the U.K. Europe, and Austria.
Zurich-based Credit Suisse claims it wasn't informed that insurance cover on the Greensill assets would lapse until just before it halted the funds. It said recently GFG, which was recently denied a British bailout for a major U.K. producer of steel in its portfolio, owes $1.2 billion to the funds.
The SFO's involvement changes the game for Credit Suisse, which is struggling with the delicate question of how to handle clients complaining about Greensill losses, amid a slew of class-action claims.
Moral Hazard Vs Irate Clients
For Credit Suisse, offering compensation for losses raises the specter of moral hazard in the future, but playing hardball on claims may antagonize clients. Ironically, the specter of graft and money laundering at GFG would make Credit Suisse's stance towards clients somewhat easier, legally.
Together with Archegos, Greensill is roiling Credit Suisse, which has thus far paid back $4.8 billion to investors but warned they may face losses. Clients in the funds are gearing up for a showdown with the Swiss bank over the investments, amid Swiss regulatory scrutiny.
