The Pyramid of Lies: Lex Greensill and the Billion-Dollar Scandal

Product Information

It doesn't take long to read and it's a pity that he didn't do a better job of telling the story but more than likely there would have been a rush to get something to print. When the company finally collapsed it exposed the revolving door between Westminster and big business and how David Cameron was allowed to lobby ministers for cash that would save Greensill's doomed business. Instead, Credit Suisse and Japan's SoftBank are nursing billions of dollars in losses, a German bank is under criminal investigation, and thousands of jobs are at risk.

NATHAN HUNT: In the end, it was actually a small insurance company that collapsed the house of cards that was Greensill Capital. How did that come about?In March 2021, an obscure financial technology company called Greensill Capital collapsed, going into administration. As it unravelled, a multibillion-dollar scandal emerged that would shake the very foundations of the British political system, drawing in swiss bankers, global CEOs, and world leaders, including former British Prime Minister, David Cameron. At the centre was an Australian financier named Lex Greensill. An epic true story of ambition, greed and hubris – the collapse of Greensill Capital is a billion pound scandal that shredded the reputation of a British Prime Minister.

Pyramid of Lies charts the meteoric rise and spectacular downfall of Lex Greensill and his company. He had a simple idea that disrupted a trillion dollar industry and drew in Swiss bankers, global CEOs, and world leaders, including former British Prime Minister, David Cameron. But a staid business model concealed dubious practices, as Greensill made increasingly risky loans to fraudulent companies using other people’s money. Lex Greensill had a simple, billion-dollar idea – democratising supply chain finance. Suppliers want to get their invoices paid as soon as possible. Companies want to hold off as long as they can. Greensill bridged the two, it’s mundane, boring even, but he saw an opportunity to profit. However, margins are thin and Lex, ever the risk taker, made lucrative loans with other people’s money: to a Russian cargo plane linked to Vladmir Putin, to former Special Forces who ran a private army, and crucially to companies that were fraudulent or had no revenue. If we can pull off [a public listing]”, Lex Greensill says in early 2020, “me and my brother will be the richest men in Australia”; just over a year later, he tells one of his major shareholders, “It’s over... I’m ashamed for what I’ve done to my family name”. As ever, the dream dies gradually, then suddenly. DUNCAN MAVIN: Yes, that's right. So many of these supply chain finance assets, the biggest insurers in particular, the pension funds and so on, they can't invest in them because they're not investment grade. And so the way you make the investment grade is you take out trade credit insurance, and that makes them investable for a much broader group of investors. The trouble for Lex was a lot of the big trade credit insurers wouldn't work with him. They met him over the years, and they dealt with them over the years and found they didn't like the way we did business.

And in that case, there's a few million dollars of maybe somebody who has got a little bit more than that has been poured into these funds, which have been sold as ultrasafe, but in fact, they aren't really. They're full of risky loans. And so Credit Suisse played a really important role in fueling Greensill Capital growth, but also spreading the risk to people who didn't understand what they were getting into. NATHAN HUNT: I have to wonder what on earth was the former Prime Minister of the U.K. David Cameron doing wrapped up in Greensill Capital. Why was he involved in this? Lex Greensill had a simple, billion-dollar idea - democratising supply chain finance. Suppliers want to get their invoices paid as soon as possible. Companies want to hold off as long as they can. Greensill bridged the two, it's mundane, boring even, but he saw an opportunity to profit. However, margins are thin and Lex, ever the risk taker, made lucrative loans with other people's money: to a Russian cargo plane linked to Vladmir Putin, to former Special Forces who ran a private army, and crucially to companies that were fraudulent or had no revenue. DUNCAN MAVIN: Yes, sure. Yes, he comes across that very early on in his career. So in his early 20s, in Australia actually working for a businessman there who had ideas about supply chain finance and the technology that could really sort of drive supply chain finance at that time, and he sort of developed his ideas around it through his career in Morgan Stanley and Citigroup and also working for the U.K. government as an adviser there. Pyramid of Lies charts the meteoric rise and spectacular downfall of Greensill and his company. He had a simple idea - democratising supply chain finance - and disrupted a trillion dollar industry in the process. But a staid business model concealed dubious practices as Greensill made increasingly risky loans to fraudulent companies using other people's money.

And as you say, in one form or another, it's been around for a long time. In the last I guess, now 25 years or so, there have been various forms of this that have developed that fund it in different ways. In particular Lex's particular slant on this was that he would fund it through selling these loans essentially to investors. So unlike a bank, which is funding this from its own balance sheet, Lex doesn't have a balance sheet. So he goes out to investment funds and says, look, I can provide you with some kind of yield by funding these transactions. And I think they looked at Lex Greensill and said, yes, this guy -- there's some challenges with this guy. Yes, he tends to double down on risky things. He tends to make every loan we can rather than be a bit more discerning. But that's our job, right? Our job is to invest in these people and then shape them the way that we think they should be running their businesses. In this case, they couldn't do that, right? And so that was an error on their part. That's my view anyway. And there would be some sort of implausible excuse given. A very, very difficult firm to deal with. And I suppose that was probably one of the biggest red flags, right, that if somebody is so desperate not to tell you the truth, not to answer your questions, even questions which seem pretty straightforward, then that's a real red flag. If you've got a genuine business that's genuinely growing faster that is being done in a very honest and well organized and well structured way, then you're probably fine answering difficult questions from journalists. But if you've got a business which fundamentally is not doing what it's supposed to, then that's always going to be a difficult relationship.And it's a question I took to Credit Suisse, and I took to SoftBank as a journalist many times. It was so startlingly problematic. In the end, The Bond & Credit Co. was taken over by a company -- Japanese insurer, Tokio Marine. And when Tokio Marine got involved, they looked at The Bond & Credit Co's exposure to Greensill and the Green -- the funds that were investing in Greensill assets. And they said, hey, this is too much. We don't want to do this anymore. And that really spelled the end, right, because without that insurance, the funds that have invested in Greensill's assets, they're no longer able to go out to the same pool of investors. NATHAN HUNT: A final question, Duncan. You also became a character in the Greensill story, an unwilling character, but a character. As you were investigating Greensill for Dow Jones and for your book, what was your experience with them?