HSBC Due Diligence Leads to Fintech Stenn Collapse

Stenn Technologies, a UK-based invoice financing provider valued at $900 million in 2022, has dramatically collapsed following serious financial irregularities. The company went into administration on December 4, 2024, after a series of critical events:

Key Events

• HSBC discovered potentially fraudulent transactions within the company

• The UK operating companies (Stenn Assets UK and Stenn International) were placed into administration

• Banking facilities were frozen by multiple financial institutions, including:

  • HSBC Innovation Bank

  • Citi

• The company employed over 200 people globally

• Had previously deployed more than US$10 billion in capital since 2016

• Administrators (Interpath) urged suppliers to seek alternative invoice financing solutions

Trigger for Investigation

A passing reference in US criminal indictments prompted HSBC to probe Stenn's transactions, which ultimately led to the company's collapse. The investigation revealed significant compliance concerns that resulted in the immediate administrative action.

Current Status

• Stenn Hub platform remains accessible on a "read-only" basis

• Debtors are still encouraged to continue repaying invoices

• The full extent of financial irregularities is still being investigated

The sudden collapse has created a notable disruption in the invoice financing market, with industry participants reporting increased demand for alternative financing solutions.

Commonly Asked Questions About the Collapse of Fintech Stenn

What is Stenn and why did it collapse?

Stenn was a UK-based fintech company specializing in invoice financing for small and medium-sized businesses. It collapsed into administration in December 2024 following an application by HSBC to the UK High Court. This action was triggered by HSBC's discovery of potentially suspicious transactions at Stenn, potentially linked to a US criminal indictment concerning a Russian money laundering scheme.

What specific event led HSBC to investigate Stenn?

HSBC, particularly its subsidiary HSBC Innovation Bank, initiated an investigation into Stenn's transactions after US authorities unsealed criminal indictments in a money laundering case. These indictments included references to Stenn and its founder, Greg Karpovsky. Though neither Stenn nor Karpovsky were defendants in the US case, the references raised concerns for HSBC, leading to a deeper examination that allegedly uncovered questionable transactions.

What were some early warning signs about potential issues at Stenn?

Several red flags existed before Stenn's collapse. In 2018, auditor EY resigned due to concerns about related party transactions and insufficient explanations from management. Additionally, Karpovsky was previously involved in Eurokommerz, a Russian invoice finance company that collapsed amidst fraud allegations. Furthermore, Karpovsky was also involved with Silverbird Global, another UK fintech that failed due to potentially suspicious transactions linked to Russia.

What was Stenn's business model and who were its key partners?

Stenn operated by acquiring unpaid invoices from businesses, providing them with immediate capital and assuming the risk of collecting payment. Its partners included prominent financial institutions such as Citigroup and Barclays, as well as investors like Centerbridge Partners. Citigroup, in particular, had formed a partnership with Stenn in 2022 to facilitate financing for businesses in supply chains.

How did HSBC become Stenn's lender?

HSBC's exposure to Stenn primarily stemmed from a revolving credit facility originally signed with Silicon Valley Bank UK. HSBC acquired this facility following the collapse of Silicon Valley Bank in 2023.

What are the allegations against Stenn and its founder, Greg Karpovsky?

While Stenn and Karpovsky were not accused of wrongdoing in the US criminal case, they were mentioned in indictments. One indictment alleged that Stenn Assets UK received funds from a Singaporean company linked to a Russian citizen who later pleaded guilty to running an unlicensed money transmitting business involved in transferring large sums of Russian money. Another indictment listed Karpovsky's personal email address as being linked to a trading account at a Singaporean metals exchange allegedly used in the money laundering scheme.

What has been the response of Stenn and its founder to the allegations?

Greg Karpovsky has denied any wrongdoing related to Stenn and stated his cooperation with the administrators. Stenn's COO, Andrey Gurdzhibek, has also claimed no involvement or awareness of any wrongdoing and full cooperation with administrators. Meanwhile, CFO Chris Rigby is focused on assisting the administration process.

What are the potential implications of Stenn's collapse?

The collapse of Stenn is expected to raise questions about the due diligence practices of its banking partners and investors, especially given the existing red flags. It highlights the importance of thorough vetting and risk assessment in the fintech sector. Additionally, it underscores the need for financial institutions to be vigilant about potential money laundering activities.

Our Opinion

The Stenn situation is a major concern for alternative lending. Despite a $900 million valuation and partnerships with banks like Citi and Barclays, Stenn faces trouble due to potential Russian money laundering.

This impacts the entire field, highlighting missed warning signs such as EY quitting as auditor in 2018, the founder's past company fraud, and suspicious Russian ties.

Lenders could be potentially affected by the implications for invoice financing, which should be straightforward and secure.

It's alarming that major players like Centerbridge Partners and Citigroup overlooked these issues.

This erodes confidence in fintech lenders during a period of market scrutiny.

Honest companies will struggle more to secure bank partnerships and funding. A stronger self-regulation in the industry is critical, rather than relying solely on big banks for oversight. This is a challenging yet intriguing case for the industry.

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