HPS Investment Partners, founded by Goldman Sachs alumni, was acquired by BlackRock last July.
The firm was the lead lender to telecom entrepreneur Bankim Brahmbhatt.
Accounts receivable acquired from other businesses was used as collateral.
HPS later noticed invoice discrepencies and accused Mr. Brahmbhatt of "breathtaking fraud"—
they alleged the collateral was worthless.
"The wipeout of HPS’s loan took Wall Street by surprise.
How could one of the most sophisticated private-lending firms in the world be so badly duped?
Why didn’t anyone spot the issue before BlackRock, the world’s largest asset-management firm,
sealed its deal with HPS? Could similar frauds be lurking in the $3 trillion dollar private-lending industry?"
It appears that several
red flags were present and should have drawn scrutiny.
If this information was available, HPS Investment Partners failed to perform proper due diligence.
https://www.msn.com/en-us/money/companies/how-fake-invoices-duped-blackrock-unit-into-a-400-million-loan/ar-AA1W5YGc
Comments
https://www.mutualfundobserver.com/discuss/discussion/comment/200883/#Comment_200883
Unfortunately, several months have passed and this WSJ update doesn't mention any resolutions except that big and famous institutions wrote off their losses stating that they wasn't material to their balance sheets.
But $400-500 million fraud is HUGE! The guy basically ran a chain of telecom services and financing companies only on paper for 5 years.
Former Wall Street darling Charlie Javice conned
JPMorgan Chase, who acquired Frank in September 2021 for $175 million, believing the platform served more than 4 million students across 6,000 higher education institutions. However, prosecutors proved that Javice had fabricated the vast majority of those customers, with the actual number being fewer than 300,000.
The deception unraveled when JPMorgan attempted to market its banking products to Frank’s supposed customer base. When the bank sent marketing emails to 400,000 purported Frank customers, approximately 70% bounced back as undeliverable. The bank’s investigation revealed that Javice had enlisted the help of a data science professor, paying him $18,000 to create fake customer data.
Frank was sentenced to just over seven years in prison on Monday for orchestrating a $175 million fraud. It’s a rare day when a federal judge openly calls a multi-billion dollar bank "stupid" in a sentencing hearing, but that’s exactly what happened in this case since a high school student would have performed more due diligence.
When you con the bank with a little fake paper, you get 7 year sentence, the same as manslaughter or death during DUI.
When the bank cons taxpayers, they get billions in bonuses.
Round up the usual suspects!