A London-based financial services startup, Stenn Group, has reportedly entered administration, leaving creditors facing losses of over £100 million.
The company, which specialized in invoice finance, had been under investigation by HSBC, its lender, following allegations of links to a Russian money laundering case.
As reported by The Irish Times, the investigation was triggered by a reference to Stenn in a US indictment, which led HSBC to demand repayment of a $35.3 million revolving credit facility.
Stenn’s failure to repay the loan resulted in the company’s bank accounts being frozen by Citibank.
Insolvency practitioners from Interpath have reportedly been appointed to investigate the affairs of Stenn Assets UK and Stenn International.
The investigation will examine the company’s structure, financial assets, and transactions, including the source and allocation of tens of millions of dollars in company accounts.
The administrators are also conducting a forensic review of bank statements and transactions, as well as the accounting treatment of the company’s business model.
The Financial Conduct Authority (FCA) has been informed of the investigation and is being kept updated on its progress.
The collapse of Stenn Group has raised concerns about the company’s links to Russian money laundering.
US authorities have alleged that Stenn Assets UK received $1.7 million from a Singaporean company linked to a Russian citizen who pleaded guilty to running an unlicensed money transmitting business.
The business is accused of transferring over $150 million in Russian money.
The case highlights the importance of due diligence and risk management in the financial sector.
The investigation into Stenn Group’s affairs is presently ongoing, and it is likely that further details will emerge in the coming weeks and months.
Stenn Group and its founder, Greg Karpovsky, were not accused of any wrongdoing in a related US criminal case, in which they were not defendants.
Karpovsky has denied any involvement in wrongdoing related to Stenn.
Established in 2015, Stenn was an invoice finance provider that purchased invoices from businesses at a discount to advance cash before customers settled their bills.
The company then allegedly sold these invoices to institutions, following a business model similar to that of Greensill, a failed financial business.
During a High Court hearing in London, where two Stenn companies were placed in administration, Justice Adam Johnson expressed concerns about the legitimacy and sustainability of Stenn’s business model.
He noted that HSBC’s evidence suggested that Stenn’s financial statements may have been based on inaccurate assumptions.
The administrators are currently running the business to collect outstanding debts, but the issuance of new invoice financing has been suspended.
It is now being estimated that Stenn International has a significant deficiency to creditors, totaling approximately £123 million.
