Greensill Sued by West Virginia Governor Over Mining Loans

Greensill Capital was sued by a West Virginia coal-mining company in what may be the first U.S. lawsuit since the financial firm was forced into insolvency.

Bluestone Resources Inc., owned by the family of West Virginia Governor Jim Justice II, said in a federal lawsuit filed Monday night in New York that its mining business faces a “clear and present threat” from the collapse of London-based Greensill. Bluestone claims it was defrauded by Greensill in an $850 million financing deal.

Greensill was left fighting for survival this month as investors cut ties over worries about the creditworthiness of its borrowers. Credit Suisse Group AG, citing valuation concerns, moved to wind down a $10 billion group of supply chain finance funds linked to financier Lex Greensill.

Representatives for Grant Thornton Ltd., which has taken over the running of Greensill, and Credit Suisse declined to comment.

Bluestone said it entered into a long-term financing agreement in which Greensill advanced $850 million. About $108 million of that was paid back in fees, according to Bluestone. Greensill also received warrants entitling it to at least $100 million.

Both Lex Greensill, the firm’s founder and chief executive officer, and Vice Chairman Roland Hartley-Urquhart are named as defendants in the suit.

According to the complaint, Hartley-Urquhart called the governor’s son, Bluestone Chief Executive Officer James Justice III, asking him to make a payment directly to Credit Suisse on Feb. 9, and to take the blame for a payment missed by Greensill to the Swiss lender. Bluestone said it was not aware that Credit Suisse were involved until that phone call.

Coal Delivery

The document also alleges that Sanjeev Gupta’s GFG Alliance, a key customer of Greensill, was introduced to Bluestone by the U.K.-based lender. Bluestone said it was pressured into selling coal to GFG in June 2020 and that it has yet to be paid for the delivery. Gupta’s businesses were the largest single client of Greensill’s prior to its collapse.

Hartley-Urquhart also attempted to pressure the firm into selecting Rothschild and Morgan Stanley as financial advisers, according to the filing. Both Lex Greensill and Hartley-Urquhart used to work for Morgan Stanley.

Morgan Stanley and Rothschild declined to comment. A representatives for Gupta wasn’t immediately available for comment.

Bluestone claims it was lulled by Greensill into increasing its dependency on the firm while Greensill remained silent about its fraudulent activities elsewhere and its worsening financial situation in the months before its collapse.

“Greensill Capital’s sudden and unjustified abandonment of Bluestone, together with all of the press surrounding Greensill Capital’s fall, now present a clear and present threat to Bluestone’s business,” according to the lawsuit. “Defendants are responsible for all damages to plaintiffs caused as a result of their egregious actions.”

In a statement Tuesday, the mining company said it is in discussions with potential lenders to replace the existing Greensill facilities and that it has “adequate working capital to support its operations, to serve its customers and to maintain its relations with all its stakeholders.”

The case is Bluestone Resources Inc. v. Greensill Capital (UK) Ltd., 21-cv-02253, U.S. District Court, Southern District of New York (Manhattan).

©2021 Bloomberg L.P.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.