Zurich Insurance has alleged that a receivables purchase agreement between Greensill and Liberty Commodities was “a sham”, citing claims by Sanjeev Gupta that financing was actually arranged verbally as a three-year facility. 

The insurer makes the allegations in a counterclaim filed against Greensill’s German banking entity in the London High Court last month. The case is one of many to have arisen out of Greensill’s collapse in March 2021. 

Greensill Bank AG initially sued Zurich in August last year, after Liberty trading houses in London, Dubai and Singapore failed to make payments due under a receivables purchase agreement. 

The financier submitted a claim to Zurich in March 2022, saying a Credit Suisse fund that invested in Greensill-issued notes was due more than US$274mn in reimbursement from the insurer. 

However, Zurich has refused to pay out on that claim, and in last month’s defence filing argues the financing provided by Greensill to Liberty was, in reality, not part of a genuine receivables purchase agreement. 

It cites witness statements provided by Gupta as part of winding-up proceedings against Liberty Commodities UK. 

Gupta claimed in those statements that Greensill’s founder and chief executive, Lex Greensill, suggested to him documents underpinning the receivables programme were “irrelevant” to the provision of finance. 

The duo would agree essential parts of their arrangements verbally, Gupta added, including that Liberty would be given three years’ notice if financing was to be withdrawn. 

Similar claims were made in a position paper filed in May 2021 by several GFG Alliance members – a network of companies with ties to Gupta, including Liberty Commodities. 

That paper claimed written financing terms “did not represent the totality of the financing arrangements agreed” and were subject to a “minimum three-year commitment” from Greensill, Zurich says. 

The insurer says Gupta’s comments and the position paper show that “the true arrangements between Liberty and Greensill… did not involve short-term lending (i.e., maximum 90 days) to Liberty based on genuine accounts receivable, but constituted long-term, unsecured lending from Greensill to GFG”. 

As a result, Zurich says losses are not covered by the policy it provided to Greensill. 

A spokesperson for Lex Greensill says he “wholly rejects the allegations set out in the Zurich pleadings, which are without any foundation and will be addressed robustly when he files his defence and any counterclaims”. 

A GFG Alliance spokesperson says: “GFG Alliance was not involved in any insurance arrangements which Greensill had in place and any attempt to link us to the Greensill insurance is misplaced.” 

Zurich Insurance and administrators for Greensill Bank AG declined to comment. 

The case also reiterates claims raised in other Greensill cases that receivables being financed were not based on real underlying trades.

The insurer gives the example of agri commodity trading giant Cargill. Greensill allegedly financed invoices to Cargill even though the company “had no trading relationship with Liberty” and therefore “would have failed to pay the purported debt on the relevant due date”, it says.

Zurich says there are 35 further companies in the same position. It says the purchase of “non-existent receivables” would not be covered by the policies it provided to Greensill. It adds that claims exceed customer limits by a total of US$141mn.

In some cases, claims related to allegedly non-existent receivables have been attributed to a future receivables financing programme offered by Greensill.

Gupta said in April 2021 that Greensill financed invoices from companies expected to become customers at a later date, and GTR understands that is still the position held by GFG Alliance companies.

But Greensill has insisted that a condition of its future receivables facilities was that an existing business relationship must be in place, underpinned by data.

In addition, Credit Suisse documentation suggests that Liberty Commodities did not have its own future receivables financing line.

Greensill’s spokesperson was unable to comment on when the company will file its response to Zurich.