Greensill Capital Is Target of U.K. Government Probe | Sidnaz Blog

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A U.K. parliamentary committee is set to hear testimony from Greensill founder Lex Greensill today.



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Kieran Cleeves/Zuma Press

The U.K.’s top financial regulator said it is investigating failed financial firm Greensill Capital, citing allegations of what it called “potentially criminal” matters.

The Financial Conduct Authority said it is collaborating with other U.K. enforcement agencies and authorities overseas as part of its investigation into Greensill’s collapse.

The disclosure came in a letter from the FCA to a U.K. parliament committee that is set to hear testimony from Greensill founder

Lex Greensill

on Tuesday. It will be Mr. Greensill’s first public comments since the firm tumbled into bankruptcy in March.

A representative for Greensill declined to comment.

Founded by Australian-born Mr. Greensill, the company billed itself as a technology startup that competed with traditional banks such as

Citigroup Inc.

and JPMorgan Chase & Co. Greensill’s goal was to offer supply-chain finance to companies that had fallen below the radar of traditional banks that preferred larger, more-established clientele.

Greensill plunged into crisis in March after it lost credit insurance that was crucial to its business.

Credit Suisse Group AG


CS -0.44%

froze $10 billion in investment funds that Greensill relied on to fuel much of its business. Greensill’s bank was taken over by authorities in Germany and is under investigation there into its accounting for loans to a major client.

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The startup’s business model required complex financial engineering. It made supply chain loans to companies, then packaged them up into notes, selling those on to investors, which served as off-balance-sheet financing for Greensill.

The announcement of a government investigation ramps up pressure on Mr. Greensill, who has been working with the company’s bankruptcy advisers to salvage parts of the business.

The FCA’s letter cited “a number of allegations have been made in the press regarding the circumstances of Greensill’s failure, some of which are potentially criminal in nature.”

Write to Duncan Mavin at duncan.mavin@wsj.com and Julie Steinberg at julie.steinberg@wsj.com

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