UK fraud investigation launched into Liberty Steel owner

The U.K.’s fraud prosecutor on Friday opened a probe into Sanjeev Gupta’s GFG Alliance over suspicions of fraud and money laundering in the magnate’s vast industrial empire that includes Luxembourg.

The Serious Fraud Office is investigating “suspected fraud, fraudulent trading and money laundering in relation to the financing and conduct of the business,” according to a statement. The probe includes the financing arrangements with Greensill Capital UK Ltd.

GFG Alliance includes Liberty Steel, which operates a steel plant in Dudelange employing about 200 workers.

Prosecutors are starting to round in on both Gupta and Greensill, after months of scrutiny from lawmakers and the media over its financing practices. Earlier this week, the U.K. Financial Conduct Authority said it was also investigating Greensill and cooperating with counterparts in other U.K. enforcement and regulatory agencies. It’s also working with German, Australian and Swiss authorities.

“GFG Alliance will co-operate fully with the investigation,” a GFG spokesperson said.

Grant Thornton, Greensill’s administrators, declined to comment.

Collapse

GFG has come under the microscope after the collapse of Greensill Capital in March revealed it had been a recipient of financing based on expected future invoices, for sales that were merely predicted.

Greensill was Gupta’s largest source of financing before its collapse. The London-based lender supplied billions of dollars in loans to GFG, many of which were packaged and sold onto investors in funds run by Credit Suisse Group AG. Greensill fell into administration in after a key insurance partner didn’t renew coverage on loans made to some of its customers, including GFG.

Much of the financing extended to GFG by Greensill was from the finance firm’s German banking unit. Germany’s financial watchdog shuttered Bremen-based Greensill Bank AG and asked law enforcement officials to investigate accounting irregularities at the lender in March. The bank was closed after the lender identified problems in how Greensill Bank booked assets tied to Gupta’s companies.

What has also come to light is the activities of the tycoon’s trading business Liberty House Group. Four banks stopped working with the company, starting in 2016, after they became concerned about what they perceived to be problems in paperwork provided by Liberty, Bloomberg News reported.

The investigation is a huge setback for Gupta, who recently looked to be making progress in refinancing his businesses after the collapse of Greensill. The metals magnate had agreed terms to new loans for his U.K. steelmaking operations, as well as for one of his Australian units.

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