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A Credit Suisse unit blacklisted Gupta while another bank-rolled him

(Bloomberg) – Executives at Credit Suisse Group AG ignored warnings from colleagues about troubled steel magnate Sanjeev Gupta when they closed $ 1.2 billion in customer funds to his companies, according to people familiar with the case. Gupta’s Liberty Commodities Ltd. in 2016 because they suspected some of his deals were not legit, people said. When they learned about two years later that the bank was lending to its businesses through a series of investment funds, which eventually grew to $ 10 billion, they voiced their concerns to the leaders in compliance and the division that housed the loans, one of the people said. . The announcement that Credit Suisse may have put customers at risk despite internal concerns about Gupta’s operations adds a new twist to the debacle resulting from the implosion of Greensill Capital in March, the financial firm central to the triple relationship. According to a May 14 statement, the British Serious Fraud Office is investigating Gupta’s group of companies for alleged fraud, including in the financing deals with Greensill. Credit Suisse filed a lawsuit to bankrupt Gupta’s Liberty Commodities and has since closed the funds that provided the loans and launched an internal investigation. Investors stare at losses as the bank faces embarrassing lawsuits. “We are currently focusing our efforts on getting the money back from our investors,” said Will Bowen, a London spokesman for Credit Suisse, in an emailed statement, adding that the bank’s internal investigation will focus on “all issues” related to the funds. “We are committed to learning the lessons and will share the relevant lessons learned at the right time.” Andrew Mitchell, a spokesman for the Gupta Family Group Alliance, or GFG Alliance, a collective of companies affiliated with Gupta, including Liberty Commodities, denied The Greensill saga represents just one of two disasters that Credit Suisse had in the first half of Have turned 2021 upside down. Since Greensill began to unravel, the bank has announced a $ 5.5 billion hit as a result of the explosion at Archegos Capital Management. shareholders and his successor Antonio Horta-Osorio, who arrived at the end of April, promised a major strategy review. Chief Executive Officer Thomas Gottstein, who headed the division that oversaw trade finance, was unaware of the internal concerns about Gupta that had prompted the bank to expel him, said a person familiar with the case. . employees of the trade finance unit, which borrows money for buying and selling commodities, cut ties with Gupta in 2016 after he became skeptical about his Liberty Commodities, the people said. They were suspicious of the documents the company provided, raising doubts about the transactions, they said. In an example reported by Bloomberg, the company had a different bank that looked like double shipping receipts. Credit Suisse’s commodity team had stopped working with Gupta after identifying suspicious shipments while the bank’s credit structuring team lobbied against the Greensill funds, the Wall Street Journal reported in April. Suisse as collateral for loans in 2013, but by early 2016, all of these commitments had lapsed, indicating that the financing relationship had ended, UK Companies House filings show. And while Gupta’s company listed the Swiss bank as one of its lenders in its 2014 annual report, it didn’t in the following year’s report, which dates back to May 2016, according to the documents. Their counterparts at other banks including Macquarie Group Ltd. and Sberbank PJSC, stopped trading with Liberty Commodities around the same time because of similar concerns; Goldman Sachs Group Inc. Exit in 2016, Bloomberg reports, but executives from Credit Suisse’s asset management division – which creates investment products for clients and charges a fee for overseeing them – began arranging a package of funds targeting the offering. chain financing in 2017. The entities purchased securitized loans packaged by Greensill, a company founded by Australian businessman Lex Greensill. Much of the debt was related to Gupta’s businesses. Warnings Officials at the Commodities Trade Finance Unit were concerned when they learned the funds had ties to Gupta and raised their concerns to Thomas Grotzer, general counsel of the bank’s Swiss division. They also warned Luc Mathys and Lukas Haas, the bankers who helped oversee transactions at the asset management unit, who last month promoted Grootzer to interim global head of compliance at Credit Suisse. He did not respond to requests for comment. Mathys, head of fixed income in the asset management division, and Haas, a portfolio manager, were given temporary leave in March. Neither responded to requests for comment. The bank went ahead with the funds and marketed them to investors as being composed of short-term debt backed by bills, assets deemed so safe that Credit Suisse gave the largest vehicle the lowest risk rating. Yet some of the loans were only linked to possible future income. Other parts of the bank also continued to work with Gupta. Credit Suisse’s investment bankers would lead an IPO on the US steel arm of Liberty, which was eventually withdrawn, the company said. Gupta also announced that the Swiss bank would finance its planned acquisition of the steel unit from Thyssenkrupp AG, which fell apart earlier this year. Credit Suisse has so far recouped about $ 5.9 billion of the $ 10 billion in these supply chain funds. but it remains unclear how much will ultimately be returned to investors. Loans to Gupta’s businesses are among a range of debts that are “the main sources of valuation uncertainty,” the bank said earlier this month. Liberty Commodities’ outside legal counsel investigated “alleged rumors about the paperwork” it used in 2019, Mitchell said. the spokesperson for GFG Alliance. They found no evidence to support the rumors, nor was the company “ever subject to further complaints or litigation,” he said. “LCL has ongoing banking relationships with individual financial institutions,” Mitchell said, referring to Liberty Commodities. “The trade finance market has been hugely challenging for everyone in recent years, except the very largest commodity traders. Yet no financial institution has been let out of its own pocket by lending money to LCL. On the contrary, they have received significant commercial proceeds. More stories like this are available at bloomberg.com Sign up now to stay ahead of the curve with the most trusted business news source. © 2021 Bloomberg LP

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