Bloomberg (Bloomberg) -- Credit Suisse Group AG executives ignored warnings from colleagues about troubled steel tycoon Sanjeev Gupta as they channeled $1.2 billion of client funds to his businesses, according to people familiar with the matter.Bankers in Credit Suisse’s commodity trade-finance unit blacklisted Gupta’s Liberty Commodities Ltd. in 2016 because they suspected some of its deals weren’t legitimate, the people said. When they learned about two years later that the bank was lending to his companies through a suite of investment funds, which eventually grew to $10 billion, they flagged their worries to leaders in compliance and the division that housed the loans, one of the people said.The disclosure that Credit Suisse may have put clients at risk despite internal concerns over Gupta’s businesses adds a new twist to the debacle stemming from the March implosion of Greensill Capital, the finance firm at the center of the three-way relationship.Investigations, LawsuitsThe U.K. Serious Fraud Office is now investigating Gupta’s group of companies for suspected fraud, including in its financing deals with Greensill, according to a May 14 statement. Credit Suisse has sued to force Gupta’s Liberty Commodities into insolvency and has since shut the funds that made the loans and launched an internal investigation. Investors are staring at losses as the bank confronts embarrassing lawsuits.“We are currently focusing our efforts on recovering our investors’ money,” Will Bowen, a spokesman for Credit Suisse in London, said in an emailed statement, adding that the bank’s internal probe will focus on “all of the issues” linked to the funds. “We are committed to learning the lessons and will share the relevant lessons learnt at the appropriate time.”Andrew Mitchell, a spokesman for the Gupta Family Group Alliance, or GFG Alliance, a collective of businesses linked to Gupta including Liberty Commodities, denied any wrongdoing.The Greensill saga represents just one of the two disasters that rocked Credit Suisse in the first half of 2021. Since Greensill began unraveling, the bank has announced a $5.5 billion hit from the blowup at Archegos Capital Management.ApologiesFormer Chairman Urs Rohner apologized to shareholders and his successor, Antonio Horta-Osorio, who arrived at the end of April, has promised a sweeping strategy review.Chief Executive Officer Thomas Gottstein, who was head of the division that oversaw trade finance, wasn’t aware of the internal concerns about Gupta that had prompted the bank to cut him off, according to a person familiar with the matter.Employees at the trade-finance unit, which lends money for the buying and selling of commodities, cut ties with Gupta in 2016 after becoming skeptical toward his Liberty Commodities, the people said. They distrusted the documents the company provided, triggering doubts about its transactions, they said. In one example reported by Bloomberg, the company had presented another bank with what seemed to be duplicate shipping receipts. A spokesman for Gupta has denied any wrongdoing.Banking TiesLiberty Commodities pledged assets to Credit Suisse as security for borrowings in 2013 but by early 2016, all such commitments had been extinguished, indicating that the financing relationship had ceased, U.K. Companies House filings show. And while Gupta’s company listed the Swiss bank as one of its lenders in its 2014 annual report, it didn’t in the following year’s report, which is dated May 2016, according to the filings.Their counterparts at other banks, including Macquarie Group Ltd. and Sberbank PJSC, halted trading with Liberty Commodities around the same time because of similar concerns; Goldman Sachs Group Inc. also stopped in 2016, Bloomberg has reported.Nevertheless, executives at Credit Suisse’s asset-management division -- which creates investment products for clients and charges a fee for overseeing them -- began arranging a suite of funds focused on supply-chain finance in 2017. The entities bought securitized loans packaged by Greensill, a firm created by Australian businessman Lex Greensill. Much of the debts were linked to Gupta’s businesses.WarningsOfficials at the commodity trade-finance unit were concerned when they found out about the funds’ links to Gupta and took their fears to Thomas Grotzer, general counsel for the bank’s Swiss division. They also warned Luc Mathys and Lukas Haas, the bankers who helped oversee the trades at the asset-management unit.Grotzer was promoted last month to interim global head of compliance at Credit Suisse. He didn’t respond to requests for comment. Mathys, head of fixed-income at the asset-management division, and Haas, a portfolio manager, were put on temporary leave in March. Neither responded to requests for comment.The bank pushed ahead with the funds and marketed them to investors as being made up of short-term debt secured on invoices, assets considered so safe that Credit Suisse gave the largest vehicle its lowest rating for risk. Yet part of the loans were linked to mere possible future revenues.Other parts of the bank continued working with Gupta as well. Credit Suisse’s investment bankers were due to lead an initial public offering for Liberty’s U.S. steel arm, which was ultimately pulled, according to a statement from the company. Gupta also announced that the Swiss bank would finance his planned acquisition of Thyssenkrupp AG’s steel unit, which fell apart earlier this year.Credit Suisse has so far recouped about $5.9 billion of the $10 billion in these supply-chain funds, but it remains unclear how much will be returned ultimately to investors. Loans to Gupta’s businesses are among a batch of debts that are the “principal sources of valuation uncertainty,” the bank said earlier this month.Liberty Commodities’s external legal advisors investigated “alleged rumors concerning the paperwork” it used in 2019, according to Mitchell, the spokesman for GFG Alliance. They found no evidence to substantiate the rumors, nor was the company “ever subject to further complaints or proceedings,” he said.“LCL has ongoing banking relationships with separate financial institutions,” Mitchell said, referring to Liberty Commodities. “The trade-finance market has been hugely challenging for all but the very largest commodities traders in recent years. Nevertheless, no financial institution has been left out of pocket as a result of lending money to LCL. On the contrary, they have received substantial commercial returns.”More stories like this are available on bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.<doc-sep>Bitcoin got another bashing from the Sage of Omaha. Warren Buffett told reporters at Berkshire Hathaway’s annual meeting in Omaha, Nebraska, that he still couldn’t support bitcoin. “It’s a gambling device … there’s been a lot of frauds connected with it. There’s been disappearances, so there’s a lot lost on it. Bitcoin hasn’t produced anything,” he said. “It doesn’t do anything. It just sits there. It’s like a seashell or something, and that is not an investment to me.” Buffett also pointed to a button on his jacket and said that he could call it a token and charge $1,000 for it, wrote CNBC. “What I’ll have here is a little token … I’ll offer it to you for $1,000, and I’ll see if I can get the price up to $2,000 by the end of the day. … But the button has one use and it’s a very limited use,” he said. Buffett has previously stated that bitcoin is a “delusion” but that blockchain is ingenious. Last year he called it “rat poison squared” and said it was a nonproductive asset. When asked at this month’s meeting if he’d ever be involved in the technology, he replied: “I wouldn’t be the person to be a big leader in blockchain.” Warren Buffett image via Shutterstock<doc-sep>Billionaire investor Warren Buffett is not deviating from his position on cryptocurrency. The Berkshire Hathaway chairman and CEO told FOX Business's Liz Claman that bitcoin is a “gambling device” that hasn’t produce anything substantive. “[Bitcoin] doesn’t reproduce. It doesn’t speak to you. And it doesn’t do anything. It’s like a seashell or something, and that is not an investment to me,” he said on Saturday during Berkshire’s annual shareholder meeting in Omaha, Nebraska. Bitcoin recently surged from $5,456 to an annual high of $5,864 with a market cap of $103.4 billion. But Buffett said bitcoin has a very limited use that has been tied to fraudulent activities. “I’ll tear off a button here, and we’ll have this as a little token, and I’ll offer it to you for a $1,000 and I’ll see if I can get the price to $2,000 by the end of the day,” he said. He went on to say, “People will create a gazillion of them naturally. There’s been a lot of fraud connected with them; there have been disappearances. So there has been a lot lost on it.” Buffett is no stranger to slamming cryptocurrency. Last year, he referred to bitcoin as “rat poison squared” after Berkshire Hathaway’s Charlie Munger originally called the cryptocurrency “rat poison” in 2013.<doc-sep>
Warren Buffett, an American business tycoon and one of the most successful investors in modern history – with a net worth of approximately $90 billion, has argued that Bitcoin (BTC), the flagship cryptocurrency, is a “gambling device.” Buffett, who has previously compared cryptocurrencies to “rat poison,” recently told reporters (prior to attending Berkshire Hathaway’s annual meeting): “There’s been a lot of fraud connected with [Bitcoin]; there have been disappearances. So there has been a lot lost on it. The bitcoins haven’t produced anything.” Bitcoin “Just Sits There” Buffett, who’s a notable philanthropist as he’s reportedly pledged 99% of his wealth to charity, mainly through the Bill & Melinda Gates Foundation, thinks that Bitcoin “doesn’t do anything.” He claims the world’s most dominant cryptocurrency “just sits there.” Moreover, the prominent speaker compared Bitcoin to a seashell which has no meaningful purpose. Buffett also noted he doesn’t consider Bitcoin to be an investment. He remarked: “I’ll tear off a button here. What I’ll have here is a little token…I’ll offer it to you for $1,000, and I’ll see if I can get the price up to $2,000 by the end of the day… But the button has one use and it’s a very limited use.” Bigger Question Is If You Can Do Payments On Top Of Bitcoin, A “Gambling Device” In response to Buffett’s comments, Twitter user JP Koning (jpkoning) acknowledged that Buffett was right in saying that Bitcoin is used frequently to engage in speculative trading or gambling. However, Koning, an economist and active blogger, mentioned that “the bigger question is whether you can build a payments system on top of a gambling device.” Buffett is right, bitcoin is a gambling device: https://t.co/iB90w1Qu64 But the bigger question is whether you can build a payments system on top of a gambling device. And whether that payments system will be used by everyone, or just hobbyists and outsiders. — JP Koning (@jp_koning) May 5, 2019 Koning, who writes frequently about stablecoins and various other topics related to tokenomics, questioned whether the developers of the Bitcoin protocol will be able build a payments system that “will be used by everyone, or just hobbyists and outsiders.” Koning further noted: The features that make bitcoin such a popular gamble interfere with its functionality as a payments system. Only die-hard fans or folks who lack access to regular money will ever be willing to ignore this awkwardness [and] use it for payments. Responding to Koning and Buffett’s statements, Arthur Breitman, the Chief Technology Officer at Dynamic Ledger Solutions, a company that’s focused on the ongoing development of Tezos, asked: How many stores of values do you know that don’t represent anyone’s obligation towards you, that can be self-custodied and moved around easily? Bitcoin Is “Gold 2.0” Meanwhile, Vijay Boyapati, a former Google engineer and widely-followed commentator on Bitcoin, remarked: Bitcoin is not PayPal 2.0, it’s Gold 2.0. Not unsurprisingly Buffett has a poor history of understanding gold’s value proposition. Notably, Buffett’s most recent criticism of Bitcoin as an ineffective medium of exchange (MoE) or store of value (SoV) has come right after Grayscale Investments, a subsidiary of the Digital Currency Group,launched a campaign called #DropGold. Grayscale’s campaign has been aggressively promoting Bitcoin as a better form of investment. Meanwhile, Grayscale’s management claims it’s time to move away from the gold bullion as a form of investment because “it just sits there.” In response to Grayscale’s campaign, the World Gold Council published a blog post in which it argued that Bitcoin is too volatile and it may not be considered an effective replacement for gold, which is a time-tested and established asset.