U.K. trade darling Stenn went from $900 million to insolvency in days

Karpovsky, 45, said little on a Dec. 4 call with his 250-odd staff as they learned that his trade-finance business — valued at almost $1 billion just two years ago — had collapsed. He dialed in remotely, having left the UK just before Stenn’s British subsidiaries went into insolvency, people familiar with the matter said. On a call a week later, when most employees were made redundant, he didn’t appear at all. 

Stenn’s collapse was shocking in its speed, snuffing out almost a decade of work by Karpovsky to create what he portrayed as an ambitious company using technology to plow up its humdrum industry and strike more than $20 billion worth of deals. The implosion had echoes of Greensill Capital, another lightly-regulated trade-finance company in London that was courted by Wall Street firms before unraveling in 2021. Greensill remains the subject of criminal and civil cases that are being challenged. 

Like Greensill founder Lex Greensill, whose boasts of tech prowess attracted backing from Credit Suisse and Softbank Group Corp., Karpovsky’s venture had significant supporters. Banks and investment firms including Citigroup Inc., Barclays Plc, Crayhill Capital Partners and Centerbridge Partners funded it and lined up to praise its powers of innovation. They apparently looked past Stenn’s atypical business model and unusual base of high-risk customers, as well as the founder’s previous involvement in a $1 billion Russian trade-finance company that fell apart in 2008.

But then HSBC Holdings Plc raised the alarm. The lender discovered transactions that were supposed to be with key counterparties but were potentially bogus instead and, within days, the bank had forced Stenn into insolvency, Bloomberg News first reported.

“The collapse of the company and its administration is extremely worrying,” said Nicholas Ryder, a law professor at the University of Cardiff who focuses on financial crime. “An important question here is whether these members of Wall Street conducted a sufficient level of diligence prior to supporting the company.”

Karpovsky has not responded to multiple requests for comment. In a statement to the Financial Times last month, he denied any wrongdoing and said he was cooperating with the administration. Spokespeople for the finance firms that backed him declined to comment or did not respond to requests for comment.

Bloomberg reviewed internal documents and interviewed more than a dozen people familiar with Stenn’s operations and its downfall. They asked not to be identified discussing non-public information. 

Some of Stenn’s supposedly biggest counterparties have denied ever having a relationship with the firm. They range from Zalando SE, the German online fashion retailer, to Yokogawa Electric Corp., a Japanese technology company.

‘Already a Trailblazer’

Stenn’s business was invoice financing, a form of credit that dates back at least to the merchants of ancient Rome, according to S. Alex Yang, a professor of management science and operations at London Business School. Karpovsky’s firm seemed to grow rapidly in this often-staid business, which involves buying the bills owed to small companies and securing payment from the large corporations they supplied.

“It is worth noting that trade finance is not a new industry,” said Yang. “Which raises the question: where could the rapid growth come from?” 

Karpovsky claimed to have harnessed technology in a way that allowed Stenn to provide cash to suppliers faster than competitors. Experienced bankers bought into his vision: Chris Cox, one of the most senior figures at Citigroup’s global trade-finance unit, praised the firm, as did global head of credit markets at French lender Natixis, Emmanuel Issanchou. 

So did private investors. Crayhill managing partner Josh Eaton stated in 2019 that “Stenn is already a trailblazer” that was “at the forefront of alternative finance.” He joined the board of one of its UK entities. 

Centerbridge spent $50 million on an equity stake in a 2022 deal arranged by Barclays, which gave Stenn a valuation of $900 million. Jed Hart, a senior managing director at the New York-based private equity giant, became a board observer.

Despite its close ties to some of the world’s biggest lenders, Stenn operated with little supervision. Banks have stepped back from certain markets — such as trade finance — yet arrange funding for the non-banks that are replacing them. Rule-makers globally have been examining the theme of how the collapse of one firm can ripple across to systemically-important lenders like HSBC or Citigroup. 

“It’s creating spaces where new players with not enough expertise and competence are entering,” said Angela Gallo, a senior lecturer in finance at the Bayes Business School in London. “If you combine lack of expertise with the idea of making a lot of money very quickly, it’s not difficult to predict that something will go wrong.”

Legacy Book

Employees believed Karpovsky’s vision too. They were given shares in the company in 2024 and talked of a possible initial public offering as Stenn got bigger and bigger, the people said.

There was plenty of evidence to support such optimism. Stenn Assets UK Ltd., the firm’s main London-based subsidiary, reported $108 million of pretax profits for 2022 and 2023 combined and paid $56 million of dividends to a parent company in the British Virgin Islands, filings show. 

Yet some were puzzled by Stenn’s business model. The bulk of its revenue came from relationships with a group of large, longstanding counterparties that were known internally as the “legacy book.” Staff believed that these customers paid tens of millions of dollars worth of invoices to their suppliers through Stenn. 

Internal documents show substantial relationships between Stenn and large corporations in Asia across multiple industries. Giordano International Ltd., one of the biggest Hong Kong fashion brands, an apparel-focused subsidiary of Japanese conglomerate Sojitz Corp., Singapore-based manufacturer Venture Corp. and Yamabun Trading Co., an Osaka-based gasoline retailer, along with Yokogawa appeared to have paid about $190 million of invoices through Stenn.

Taiwanese electronics companies also loomed large. A group of players from that industry, including Inventec Corp., Simplo Technology Co. and Pegatron Corp., had combined risk limits of about $140 million, meaning that Stenn was allowed to buy up to that amount of its invoices, the documents show.

Yet few Stenn employees ever dealt directly with “legacy” customers, the people said. Just a handful of senior staff managed the relationships.

Some of these large counterparties have denied having a relationship with Stenn, Bloomberg has previously reported.

The bulk of Stenn’s clients that claimed to be owed money by the Asian corporations were entities based in Hong Kong. Some 40% of them were based there, despite internal risk documents at the time describing the jurisdiction as “high risk” and employees being unable to categorize almost half of them. Staff were warned to be on the look-out for potential customers from the city that were “simply too good to be true.” 

Some were difficult to trace. Documents show that a trio of obscure Hong Kong suppliers shared in tens of millions of dollars of invoice payments through Stenn. They have little online presence and one of them appears to have been deregistered in 2021, filings show. They were all created by a Chinese company-formation firm that targets Russian clients, according to its website. 

Spokespeople for some of the larger companies that were supposed to have transacted with these Hong Kong suppliers deny ever having purchased goods or services from them. Stenn’s documents suggest that these transactions formed the basis for at least $40 million worth of financing.

Yet risk officials weren’t encouraged to focus on suppliers, the people said. 

Armed Guards

Few senior employees at Stenn knew much about Karpovsky’s background. Yet for those outside the company who did, his ability to attract a parade of Wall Street backers was mystifying. 

In Moscow more than two decades ago, Karpovsky founded an invoice-finance company called Eurokommerz Holding Ltd. By 2007, he had built the firm into the biggest of its kind in Russia, one that was touted as a leading finance company heading for an IPO that could have valued it at $1 billion.  

Exactly what happened next is unclear but in late 2008, Eurokommerz defaulted on its bonds and collapsed. Investors alleged that management then improperly took control of the company.

Eurokommerz “was alleged to be the largest factoring company in Russia but turned out to be as fraudulent as Enron, Worldcom or Madoff,” lawyers acting for hedge fund VR Capital said in a 2009 suit, which was later settled on undisclosed terms. “Almost immediately after management acquired the company, security forces locked down headquarters, the company defaulted on its debt payments.”

For Eurokommerz bondholders, the recovery prospects were close to nothing, according to credit ratings company Fitch.

The contentious Eurokommerz collapse stood out among the other insolvencies in Russia after 2008, according to Max Gutbrod, who was then a partner in the Moscow office of law firm Baker McKenzie.

“It was enough to raise red flags for every reasonably careful third party,” said Gutbrod, though he declined to comment on the collapse of Stenn.

Karpovsky denied any wrongdoing at Eurokommerz in a statement to the Financial Times last month. By 2016, he was back in the trade-finance arena with Stenn and boasted of his achievements at Eurokommerz, describing the firm in a presentation that year as “the largest privately-owned” invoice-financing business in Europe.  

Christmas Drinks

Most of Stenn’s employees began work on the morning of Monday Dec. 2 looking forward to the company’s Christmas drinks later that week. That changed when a group of top managers were summoned to an impromptu meeting with Karpovsky and Chief Operations Officer Andrey Gurdzhibek, one of his top lieutenants. 

Karpovsky explained that some issues had arisen with HSBC, one of Stenn’s lenders. The managers received a copy of an application the bank had made to the UK courts to push the company into insolvency and, as they flipped through its several hundred pages, confusion turned to shock: HSBC had alleged in detail how payments that were supposed to be coming from some of the “legacy” customers were actually from entities set up to impersonate them. 

Those reading the document were baffled: if Stenn wasn’t getting money from legitimate companies, who was it getting it from? And why?

Stenn officials initially planned to defend the company against HSBC’s allegations but, just two days later, the firm collapsed into administration, a UK form of bankruptcy. Employees were kicked out of internal systems and were unable to use email, the people said, as officials from Interpath Advisory took over. A spokesperson for Interpath declined to comment.

On Dec. 12, Interpath managing director Joshua Dwyer led a call with employees. He acknowledged the distress caused by the loss of access to company systems and the “somewhat sudden nature” of the administration. Reports about the collapse in Bloomberg and the Financial Times “gives some context, really, to the challenging situation,” he said, adding that “the steps that we had to take to secure the company’s systems and data were a necessity in that context.”

A few minutes later, Dwyer announced that most employees would lose their jobs.

Wider Fallout

The collapse of Stenn will impact other financial-technology firms operating in the industry, according to Justin Parr, a former senior Stenn employee until 2020 who is now head of credit at Swedish trade-finance firm Treyd AB. Companies such as his rely on trade-credit insurance — when insurers agree to compensate them if they don’t get paid — and this will become harder to get, he said. The collapse of Greensill had the same impact, Parr said.

“Credit insurers can quickly run for cover when broad thematic risks emerge,” said Parr. “This will be the reaction in the wake of Stenn’s collapse.”

Others wonder whether the collapse of Stenn so soon after Greensill suggests the industry needs a rethink. 

“It doesn’t really bode well for the industry if you’ve got Greensill and then Stenn,” said Eric Li, head of global banking research at Coalition Greenwich. “Does this model really work without proper regulatory oversight?”

As news of Stenn’s collapse began to sink in at the company’s headquarters on Old Street in central London, employees facing redundancy over Christmas wondered if they were going to get paid for the month. Some overseas workers on sponsored visas realized they’d need to find new work soon, the people said. 

The company’s Christmas party went ahead anyway, at a venue a few minutes’ walk away. Bewildered and unsure of what else to do, many of the staff attended.

Karpovsky wasn’t among them.