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The Pyramid of Lies: Lex Greensill and the B

The Pyramid of Lies: Lex Greensill and the Billion-Dollar Scandal

Duncan Mavin
2022
T3 384 pages · about 6h 24m to read OL27812342Wgoodreads

The Greensill supply-chain funds that Credit Suisse distributed.

Summary

Duncan Mavin, a financial journalist, reconstructs the rise and collapse of Greensill Capital, which failed in March 2021 and produced losses for Credit Suisse funds, for SoftBank and for the German bank Greensill owned.

The business Greensill claimed to be in was supply chain finance, a legitimate and low-risk activity in which a financier pays a company's suppliers early at a discount and collects from the company later. Mavin documents how the actual business departed from this. Greensill extended finance against future receivables that did not yet exist, meaning invoices for sales that had not occurred, principally to companies connected to Sanjeev Gupta's GFG Alliance, which became an enormous concentrated exposure. The assets were packaged into funds distributed by Credit Suisse to its clients, and insured by policies whose withdrawal precipitated the collapse.

Mavin also covers the political dimension: Lex Greensill's position as an adviser in the British government under David Cameron, Cameron's subsequent employment by Greensill and his lobbying of ministers for access to government lending schemes, and the resulting parliamentary inquiries. He covers SoftBank's investment and the circularity in which SoftBank-backed companies used Greensill financing. The book is well reported journalism written soon after the collapse and before the litigation concluded. Its account of how a low-risk product description concealed a concentrated credit exposure is the transferable content.

Key takeaways 7

  1. Greensill described itself as a supply chain finance business while extending credit against receivables that did not yet exist.
  2. Exposure concentrated overwhelmingly in companies connected to a single borrower group, which contradicted the diversification the funds claimed.
  3. Credit Suisse distributed the assets to its clients in funds marketed as low-risk, which transferred the exposure without transferring the analysis.
  4. Insurance policies covering the assets were the structure's foundation, and their withdrawal precipitated the collapse immediately.
  5. Political access, including a former prime minister's lobbying, was used to seek government lending scheme participation.
  6. SoftBank-backed companies used Greensill financing while SoftBank invested in Greensill, creating circular exposure.
  7. A product description that sounds low-risk conceals nothing about the actual credit exposure, which must be examined separately.

Who should read it

Credit investors and allocators who want a documented case of how a conventional low-risk product label concealed concentrated credit exposure.

Where it sits in the reference 2

Companies
Assets

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