Greensill Capital
The $10 Billion Supply Chain Fantasy
Lex Greensill convinced investors — including Credit Suisse clients and SoftBank's Vision Fund — that his supply chain finance firm was worth billions. It wasn't. Greensill Capital packaged invoices from risky, concentrated counterparties (including Sanjeev Gupta's GFG Alliance) and sold them as 'safe as cash' investments. When GFG defaulted, the entire house of cards collapsed, freezing $10 billion in CS funds.
Key Figures
Timeline
Lex Greensill, a former Morgan Stanley banker, founds Greensill Capital in London.
SoftBank Vision Fund invests $1.5B in Greensill. Valuation reaches $4B. Former UK PM David Cameron becomes advisor.
Greensill packages invoices from Sanjeev Gupta's GFG Alliance into funds sold to Credit Suisse clients as 'low-risk working capital finance.'
GFG Alliance defaults. Greensill's insurance (Tokio Marine) refuses to renew coverage. Without insurance, CS clients' funds are unsecured.
Greensill files for administration. Credit Suisse freezes $10B in supply chain finance funds. 1,000 Greensill employees lose jobs.
Archegos collapses the same month. Credit Suisse loses $5.5B from Archegos AND $10B frozen from Greensill. The bank never recovers.
What Caused It
- 1Concentrated exposure: Greensill's lending was overwhelmingly to Sanjeev Gupta's GFG Alliance — a single, risky counterparty
- 2Invoices were packaged and sold as 'safe as cash' despite being backed by companies on the verge of default
- 3Credit Suisse marketed Greensill-linked funds to retail investors and pensioners as low-risk — many lost life savings
- 4Insurance that backed the invoices (Tokio Marine) was canceled — removing the only safety net
- 5SoftBank invested $1.5B from the Vision Fund with minimal due diligence — Lex Greensill was a persuasive salesman with a British accent
Lessons Learned
- 💡'Supply chain finance' sounds sophisticated. It means 'lending money to one company that will go bankrupt.'
- 💡When one counterparty (GFG) represents the majority of your loan book, you don't have a portfolio — you have a bet
- 💡Credit Suisse sold pensioners a fund backed by Sanjeev Gupta's invoices and called it 'safe.' That should be criminal.
- 💡If a former prime minister is your advisor and SoftBank is your investor, you're not a fintech — you're a networking operation