HSBC Holdings triggered the shuttering of trade-finance firm Stenn Technologies after uncovering transactions that were supposed to be with key customers but were potentially bogus instead, people familiar with the matter said.
HSBC, which provided Stenn with a revolving credit facility, became concerned that the company’s relationships with large customers in Taiwan and Japan may not have been legitimate, the people said. Employees at Stenn believed that much of the London-based firm’s revenue came from this group of longstanding clients known internally as “legacy” customers, they said.
But apart from a handful of executives at Stenn, few other employees had access to information about these clients. Officials at HSBC feared that Stenn may have received funds from entities that had been set up to impersonate those clients instead, according to the people, who requested anonymity as details are not public.
These findings led HSBC to force two of Stenn’s UK companies into administration, a British form of insolvency, earlier this month. Stenn had attracted backing from some of the biggest firms on Wall Street, including Citigroup and Centerbridge Partners, and claimed to have provided billions of US dollars of trade finance to its customers while employing more than 200 people. Most employees will now lose their jobs, Bloomberg reported yesterday.
A spokesperson for HSBC declined to comment. A spokesperson for Citigroup declined to comment, while a spokesperson for Centerbridge didn’t respond to requests for comment. A spokesperson for Interpath Advisory, whose staff were appointed as Stenn’s administrators on Dec 4, declined to comment.
Stenn chief executive officer Greg Karpovsky, who co-founded the firm in 2015, did not respond to multiple requests for comment. He previously told the Financial Times he denied any wrongdoing in connection with Stenn.
Chief operations officer Andrey Gurdzhibek, who also did not respond, previously told Bloomberg that he was unaware of any wrongdoing and was cooperating fully with the administration.
Stenn’s business was in invoice financing, a form of trade finance where a supplier sells their invoice to an intermediary so it can get paid quicker. A company like Stenn takes a cut in return for advancing the money earlier, and shoulders the risk of the debtor not paying up.
Employees at Stenn understood that the “legacy” clients included large, publicly-traded corporations in Japan and Taiwan, while many of the suppliers requesting payment were entities based in Hong Kong, the people said. These dealings accounted for much of the firm’s revenues, they added. BLOOMBERG
