Horsemen without horses raced across an icy lake in the alpine tourist town of St Moritz, warming the snow on the men’s faces on the trails dragged behind.
In February last year, weeks before public events across Switzerland were canceled due to coronavirus, Credit Suisse brought its most precious customers to the White Turf – an equestrian event of more than a century , that the only dangerous “skijoring” race that the Swiss bank had sponsored for decades.
While the seven fearless skijorers risked their lives at the Credit Suisse Grand Prix, he was one of the guests facing the biggest threat to the bank: British steel mogul Sanjeev Gupta.
Today, the vast conglomerate of Gupta GFG Alliance takes off after the collapse of its largest lender Greensill Capital. The metals group is also being investigated by the UK’s Serious Fraud Office. He denies any wrongdoing.
Credit Suisse was known to have indirect exposure to Gupta via Greensill, which packed loans into notes acquired from Swiss bank funds. When Greensill collapsed in March, Credit Suisse was hit by the fact that a large portion of its debt could be bad, including loans to GFG.
What was not known until now, is that Credit Suisse also has a significant direct relationship with Gupta.
A number of former Swiss lender executives have revealed to the Financial Times how their private bankers and their global leadership are courting the metals mogul, offering them a VIP treatment that extends far beyond the journey to St Moritz.
Fleeing a deep relationship with the Indian-born industry, Credit Suisse ignored warnings from concerned corporate customers and their bankers.
The revelation that Credit Suisse has given Gupta everything from a mortgage on a trophy palace to a private public with its then chief executive will further anger its customers who are facing losses of billions of dollars.
Some of these customers are expected to sue Credit Suisse, accusing them of failures in the way they manage funds. And Greensill’s problems come when the bank is embroiled in another risk management scandal over its work with Archegos, the family office collapsed.
“I like the decision to finance entrepreneurs [Gupta] At all costs it was a wrong decision, “said a former senior executive in the bank’s Australian business who cited concerns over lending to Gupta as a reason for his resignation. The banker added:” It was a lot of capital that was going into a highly risky situation. ”
Credit Suisse and GFG declined to comment.
Five star treatment
After spending years treating Sanjeev Gupta, Credit Suisse filed for divorce in late March, asking the courts in the UK and Australia to put insolvency into several of its core businesses.
With $ 1.2 billion to be recovered on behalf of furious customers, the Swiss bank has other tools at its disposal. Some of Gupta’s debt facilities from Greensill have benefited from personal guarantees, according to people who know the terms, which could allow creditors to hunt down the so-called “man of steel” himself.
To that end, Credit Suisse recently hired private investigators in Kroll to track Gupta’s assets around the world, according to three people familiar with the matter.
While Gupta has continued to make a half-decade of corporate acquisition spree that has built a metal conglomerate with 35,000 employees, it has also amassed a personal collection of trophy goods. The splashy purchases ranged from a private plane and a helicopter with corresponding vanity tail signs, to a £ 42 million London mansion – owned in the name of his wife.
Credit Suisse won’t need Kroll’s services for intelligence on another of Gupta’s luxury homes: a 19th-century sandstone mansion overlooking Sydney Harbor.
“Credit Suisse provided the mortgage. They were proud of that, “the former executive said.” Going after super-prime mortgages in Australia was a key strategy. “
Helping Gupta buy the house At $ 35m ($ 27m), which he owned through a trust controlled by an Australian stock exchange friend, was only part of the service that Credit Suisse offers as its wealth manager. private.
The Swiss bank also managed the fortune of Lex Greensill, the 44-year-old Australian founder of Greensill Capital, who was a billionaire before his eponymous financial company collapsed.
Managing the wealth of controversial entrepreneurs was all part of Credit Suisse’s plan. Helman Sitohang, the long-time Asia and Pacific head of banking, has built a franchise that caters to the region’s richest businessman, embracing certain reputational risks.
“We stand as the bank for entrepreneurs,” Sitohang said in February, just days before Greensill Capital imploded. “In Asia this position has resonated very well for us.”
Gupta and Greensill also shared the same private banker with Credit Suisse: Shane Galligan, one of Sitohang’s largest rain producers, who had done his mission of managing the money for Australia’s wealthiest tycoons.
“If you look at the strategy in Asia in terms of supporting ultra-high customers, no one is bigger in private banking than he is,” said a second former Credit Suisse banker. “It covers billionaires. That was his thing. “
Galligan said Gupta received the full five-star Swiss banking experience. In addition to inviting the steel magnate to the Alpine horse event, in 2019 he launched a long-awaited meeting with Tidjane Thiam, then the bank’s executive director.
Galligan and Sitohang were instrumental in raising concerns about the bank’s growing entanglements with Gupta and Greensill, according to former Credit Suisse bankers. A person close to the bank said Sitohang was not near Gupta or Greensill.
Another former executive called for an internal call in 2020 between Galligan, Lara Warner – head of risk and compliance until she left after the Greensill and Archegos failures – and a handful of other bankers to discuss growing dangers surrounding his business with Greensill.
“There was no sensitivity or appreciation of the risk dimension,” he said. “The tone was purely, ‘We want to bank this entrepreneurial customer.’
Credit Suisse said Sitohang and Galligan declined to comment.
Flight to Zurich
In February 2020, the same month that Credit Suisse welcomed Gupta into St Moritz, British banking regulators contacted the SFO with concerns about the opaque metal conglomerate to fund his family.
Subsequently, the Swiss bank received a strict warning. In July 2020, commodity traders Trafigura warned Credit Suisse that the bank’s supply chain financial funds appear to contain a suspicious bill from Gupta’s business empire. The warning came when the bank was in the middle of a internal magazine of funds, triggered by FT reporting on his unusual relationship with Greensill SoftBank shareholder.
However, not only did Greensill-linked funds lend to Gupta, Credit Suisse also considered offering its balance sheet to the steel magnate.
In October 2020, Gupta unveiled a plan to take control of one of Germany’s oldest – and most symbolic – industrial concerns: Thyssenkrupp’s more than 200-year-old steel unit.
When the steel magnate revealed the bold offer, has not yet committed debt financing, but has had letters of support from two well-known financial institutions in its pockets: Greensill and Credit Suisse.
Support for the Thyssenkrupp offer has not been unique. Another senior executive said Credit Suisse’s investment banking division was “everywhere” GFG, attracted by potential rights on a seemingly endless string of deals, having also won a mandate on the announced list of its InfraBuild activity in Australia.
However, the rights never came. Both deals collapsed earlier this year when Greensill began dating and threatened to take GFG with him.
Greensill’s fate was sealed the last weekend of February, when Credit Suisse made the decision freeze its $ 10 billion range of supply chain financial funds, after discovering that a key insurance contract supporting the invoice securitization machine had expired.
On Friday before this fateful decision, Gupta flew to Zurich with his loyal lieutenant Jay Hambro, scion of a British banking dynasty. Twelve months after the steel baron had enjoyed Credit Suisse’s hospitality at White Turf, he entered the Swiss lender’s general palace at Paradeplatz to a very different reception.
Gupta and Hambro put pressure on the bank not to pull the plugs on the funds, according to people familiar with the discussions.
This time, however, Credit Suisse was unwilling to welcome its highly esteemed customer.
Learn more about Owen Walker is Stephen Morris