Credit Suisse Unit Funded Blacklisted Mr Gupta - Report
Bloomberg, citing people familiar with the matter, reported that Credit Suisse Group AG executives ignored warnings from colleagues about troubled steel tycoon Mr Sanjeev Gupta as they channelled USD 1.2 billion of client funds to his businesses. One of the people said “Bankers in Credit Suisse’s commodity trade finance unit blacklisted Gupta’s Liberty Commodities Ltd in 2016 because they suspected some of its deals weren’t legitimate. When they learned about two years later that the bank was lending to his companies through a suite of investment funds, they flagged their worries to leaders in compliance and the division that housed the loans.”
According to a person familiar with the matter “Chief Executive Officer Thomas Gottstein, who was head of the division that oversaw trade finance, wasn’t aware of the internal concerns about Gupta that had prompted the bank to cut him off.”
Credit Suisse spokesman in London Mr Will Bowen said “We are currently focusing our efforts on recovering our investors’ money. The bank’s internal probe will focus on all of the issues linked to the funds. We are committed to learning the lessons and will share the relevant lessons learnt at the appropriate time.”
Liberty Commodities pledged assets to Credit Suisse as security for borrowings in 2013 but by early 2016, all such commitments had been extinguished, indicating that the financing relationship had ceased. Their counterparts at other banks, including Macquarie Group Ltd and Sberbank PJSC, halted trading with Liberty Commodities around the same time because of similar concerns; Goldman Sachs Group Inc also stopped in 2016. Nevertheless, executives at Credit Suisse’s asset-management division, which creates investment products for clients and charges a fee for overseeing them, began arranging a suite of funds focused on supply-chain finance in 2017. The entities bought securitized loans packaged by Greensill, a firm created by Australian businessman Mr Lex Greensill. Much of the debts were linked to Mr Gupta’s businesses.
The Greensill saga represents just one of the two disasters that rocked Credit Suisse in the first half of 2021. Since Greensill began unravelling, the bank has announced a USD 5.5 billion hit from the blow up at Archegos Capital Management. Former Chairman Urs Rohner apologized to shareholders and his successor, Antonio Horta-Osorio, who arrived at the end of April, has promised a sweeping strategy review. The disclosure that Credit Suisse may have put clients at risk despite internal concerns over Gupta’s businesses adds a new twist to the debacle stemming from the March implosion of Greensill Capital, the finance firm at the center of the three-way relationship.