From Fintech Darling to Cautionary Tale

Heya, David here. The tale of Lex Greensill is tough to unpack. Before his company, Greensill Capital, collapsed into insolvency in March, he liked to tell anyone within earshot about his rise from a melon farm in Australia to the heights of London finance, with a fleet of private planes and chums like David Cameron. But understanding what Greensill actually did to accumulate a fortune that at one point topped $1 billion (on paper at least) is, well, complicated.

My colleague Lucca de Paoli and I spent months digging into the nitty-gritty of Greensill's business for our recent Bloomberg Businessweek story. His gig was supply chain finance, an arcane corner of banking that exploits the slow speed with which most companies pay their bills. Because it can take months for suppliers to get their cash, middlemen such as Greensill will pay them immediately at a discount and later collect the full amount from the buyer. Greensill insisted that superior technology made his operation hyperefficient and supersafe, and he packaged his loans into securities that he sold to outside investors.

But in reality, the business soon became a complex web of risky loans and investments. While Greensill Capital did arrange some short-term credit to help speed payments, much of its debt was backed not by invoices but by predictions of sales that had yet to be made. It also bet big on companies in shaky industries, and former staffers say its vaunted risk-assessment technology was nothing special. In a committee hearing in Parliament, one lawmaker read Greensill the dictionary definition of fraud and asked, "Are you a fraudster?" Greensill's response: "I am not." Click here to read our story and decide for yourself. —David Rocks