US Launches Probe after BlackRock’s HPS Uncovers $400M Fraud

U.S. prosecutors are investigating a group of telecommunications firms following revelations that BlackRock's private credit arm, HPS Investment Partners, lent over $400 million backed by receivables that appear to be fabricated, according to the Financial Times on Monday. The Department of Justice is examining entities associated with Bankim Brahmbhatt, a relatively obscure executive whose companies borrowed heavily from HPS, the report states, citing two sources familiar with the matter.

HPSfunds have been lending to companies linked to Brahmbhatt since 2020, with loans supposedly backed by receivables owed by major telecom operators. A Delaware court filing earlier this year accused Brahmbhatt and his controlled entities of widespread, brazen fraud, alleging that the documents verifying the receivables were fake.

The U.S. Attorney's Office for the Eastern District of New York (EDNY) in Brooklyn is leading the investigation. Of the $430 million lent by HPS to Brahmbhatt-associated firms, approximately half was financed using leverage from BNP Paribas, according to sources.

BlackRock, BNP Paribas, and EDNY declined to comment, while Brahmbhatt did not respond immediately. The funds involved are specialized asset-backed vehicles operating in a niche segment of private credit, which has recently faced increased risk.

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Recent bankruptcies, including First Brands, a major auto-parts supplier, and Tricolour, a subprime lender, have heightened concerns about the stability of the U.S. private credit market. The fallout from these events has led to increased scrutiny of risky lending practices and opaque financial structures, with billions in undisclosed debt and losses impacting high-profile banks and funds.

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