The collapse of Greensill Capital has been the biggest financial scandal of the year so far, having set off a massive public corruption scandal in the UK that has deeply embarrassed the ruling Conservative Party due to the close involvement of former PM David Cameron, who was on the Greensill payroll and was caught trying to steer relief funds meant for small businesses to Greensill to help avert its collapse.
Most recently, Credit Suisse cited Greensill as its reason for cutting off SoftBank from all future investment-banking business after the Japanese mega-conglomerate with a VC arm was caught lying about its real role in CS’s trade finance funds that were stocked with Greensill-packaged assets. Softbank was essentially using the fund to quietly bolster some of its portfolio companies, while also serving as an investor in the fund – an obvious conflict that we first pointed out in 2019.
But while the Greensill scandal forces a rethink of lobbying laws in Britain, at least one American politician has now been caught up in the madness: Republican West Virginia Gov. Jim Justice, who is now in the bag for $700MM thanks to Greensill’s collapse.
Gov. Jim Justice
According to WSJ’s sources, Justice (who handily run reelection in the fall after switching from a Democrat to a Republican) is personally on the hook for nearly $700MM in loans to his coal companies – loans that were taken out from Greensill.
He is also dealing with several “unrelated lawsuits” that are also putting financial pressure on his coal company. Some of the loans to Justice’s companies were sliced up and incorporated into securities that wound up, among other places, in the $10 billion Credit Suisse fund that was gated at the beginning of the Greensill crisis.
Justice’s Bluestone Resources is in talks to repay borrowers including Credit Suisse and others.The company has been ID’s as “one of three major borrowers” involved with the fund.
Bluestone hadn’t expected to begin repaying the Greensill loans until 2023 at the earliest, it said in a lawsuit fled back in March, right around the time that Greensill filed for insolvency in the UK. Greensill’s financial troubles are supposedly responsible for Justice being dropped from the Forbes’ billionaires’ list. It now estimates his net worth at $450 million, down from $1.2 billion in April 2020.
Bluestone and Greensill began their financing relationship in May 2018, when Greensill Vice Chairman Roland Hartley-Urquhart reached out to the firm through a mutual acquaintance. Bluestone companies received financing over a three-year period, and when the first set of loans matured, Greensill replaced them with new loans in a process that became known as a “cashless roll,” just one of the sketchy practices embraced by Greensill and its borrowers. In one particularly egregious process, Greensill and Bluestone embraced “prospective receivables” which haven’t yet been generated. These “prospective” loans were sometimes booked from “prospective buyers”, some of whom (likely many of whom) never actually became Bluestone customers.
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