Credit Suisse Fallen Prey to Supply Chain Fraud?

The Swiss bank's Greensill funds reportedly didn't just contain future receivables but also suspect invoices from steel magnate Sanjeev Gupta. It raises the specter that Credit Suisse has fallen prey to alleged fraud.

The Zurich-based bank is going after Sanjeev Gupta's metals and commodities collection after a $10.1 billion supply chain fund blow-up. Specifically, Credit Suisse is appealing to U.K. and Australian courts to salvage some assets linked to Greensill, the fund partner, before companies controlled by Gupta enter insolvency. 

Credit Suisse is being drawn into a deepening political, economic, and corporate scandal rippling through Britain and Australia, hitting Switzerland and Germany along the way. The key question for the Swiss lender is what it can pick from the collapse of Greensill, which in turn was heavily exposed to Gupta's GFG. The retrieval is likely to be waged in a years-long legal battle involving regulators in at least four countries.

Irregularities In Invoicing

Four German companies that were invoiced by Liberty Commodities – KME Germany, RPS Siegen, Voestalpine Boehler Edelstahl and Salzgitter Flachstahl – denied doing business with the Gupta entity, according to the«Financial Times»(behind paywall). This raises the specter of irregularities at companies controlled by Gupta.

The British outlet had reported last week that Greensill's administrator hadn't been able to confirm some debtors listed on the insolvent firm's invoices. The specialist financing company had bundled the loans – many of them to Gupta companies – and sold them on to Credit Suisse.

Clients Holding The Bag

Gupta told the paper some of the invoices were «prospective» ones on potential future receivables. The outlet reported that unnamed senior Credit Suisse executives are worried that the bank fell prey to fraud. CEO Thomas Gottstein alluded to this possibility last week, in an interview following what he promised would be a no-holds-barred review of the Swiss bank.

Credit Suisse, which last week told investors it will take an up to $4.7 billion hit from Archegos, hasn't disclosed a potential hit from the supply chain funds. It is reportedly leaning towards leaving clients – primarily wealthy individuals in its private bank – holding losses on the funds. Thus far, Credit Suisse has returned roughly $3.1 billion to the fund's investors, mainly from skimming cash holdings.