(Reuters) -U.S. prosecutors are probing a group of telecoms firms after BlackRock’s private credit arm, HPS Investment Partners, said it lent them over $400 million backed by receivables that appear to be fake, the Financial Times reported on Monday.
The Department of Justice is investigating entities tied to Bankim Brahmbhatt, a little-known executive whose companies borrowed heavily from HPS, the report added, citing two people with knowledge of the matter.
Funds run by HPS began lending to companies tied to Brahmbhatt in 2020, with the loans backed by receivables the firms claimed were owed by major telecom groups, according to the report.
In a Delaware court filing earlier in the year, funds managed by HPS accused Brahmbhatt and his controlled companies of “an extraordinarily brazen and widespread fraud” alleging the documents to verify the receivables were fabricated, as per the report.
Prosecutors in the U.S. Attorney’s Office for the Eastern District of New York (EDNY) in Brooklyn are leading the probe, the report said.
BlackRock and EDNY declined to comment. Brahmbhatt did not respond immediately.
Of the $430 million HPS lent to Brahmbhatt-linked firms, roughly half was funded with leverage from BNP Paribas, the report added, citing a person with knowledge of the matter.
BNP Paribas did not immediately respond to a Reuters request for comment.
The report says that the HPS funds were specialist asset-backed finance vehicles – a niche segment of the private credit market, which has seen some recent risks emerge.
Recent bankruptcies of First Brands, a major U.S. auto-parts supplier, and subprime lender Tricolor have intensified concerns over the stability of the U.S.’s vast private credit market.
The fallout, which includes billions in undisclosed debt and losses for high-profile banks and funds, has prompted scrutiny of aggressive lending structures and opaque finance practices.
(Reporting by Pritam Biswas in Bengaluru; Editing by Vijay Kishore)
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