The $430 Million Email

Written by: Anthony Eden, Iridium Credit  

Last July, an analyst at HPS Investment Partners noticed an email domain that didn't match. HPS - one of the most successful private credit firms in the world, freshly acquired by BlackRock for $12 billion - had lent $430 million to a group of telecom companies run by Bankim Brahmbhatt. The loans were backed by receivables supposedly owed by T-Mobile, Telstra and Telecom Italia Sparkle. When the analyst flagged the domain, HPS started checking others. Same problem. Then more. They called Brahmbhatt. He brushed it off, told them not to worry. That was their last conversation. He stopped picking up.

HPS sent people to his Garden City offices. Doors locked, space vacant. Neighbors said they hadn't seen anyone come or go in weeks. His home was the same story - cars unmoved, a forgotten package gathering dust on the doorstep. HPS hired Quinn Emanuel to investigate. Within days, every customer email used to verify those receivables over two years checked out as fake. Brahmbhatt's team had registered fraudulent domains, built fake websites and backdated contracts to 2018. Two weeks after that first email flag, HPS was in court. The invoices were all fabricated.

Five years. That's how long it ran.

The deal was structured as a receivables-backed credit facility - not invoice purchasing, but lending against a pool of receivables as collateral. Brahmbhatt's companies, including one called Carriox Capital that marketed itself as doing "invoice factoring" for telecom carriers, claimed they were owed money by major telcos. BNP

Paribas funded the senior tranche (roughly half the $430 million). HPS took the junior piece through its Asset

Value fund, chasing 9-11% returns. More risk, less visibility. Brahmbhatt submitted periodic schedules of "eligible receivables," drew advances against them, and the pool turned over continuously - old receivables supposedly paying down, new ones replacing them. A revolving borrowing base that looked healthy on paper.

The reason it lasted five years is familiar to anyone in factoring. Brahmbhatt paid interest on old loans with proceeds from new loans. Classic Ponzi mechanics. The borrowing base always looked covered because he kept adding "new receivables" to replace ones that had supposedly been paid. Payments arrived on schedule - just not from T-Mobile's treasury. The first borrowing base certificate in 2020 probably got genuine scrutiny. By 2024, nobody was questioning the fifteenth. I've chatted with enough PMs and AEs to know this pattern: the first invoice in any relationship gets scrutinized. The five hundredth gets waved through. Trust compounds. So does exposure.

The natural question is: how did nobody check? HPS manages $180 billion. They had Alter Domus as collateral agent, Deloitte running customer checks, CBIZ doing accounting reviews. Three layers of oversight. But look closer at what each layer actually did.

Alter Domus tracked the borrowing base - verified that the math was right, the concentration limits were met, the aging thresholds weren't breached. Formulaic compliance. They get paid a flat admin fee regardless of whether the loan performs or blows up. No economic upside from catching fraud, no direct downside from missing it. Deloitte and CBIZ audited borrower-supplied documentation. They reviewed the invoices Brahmbhatt gave them against the contracts Brahmbhatt gave them against the emails Brahmbhatt gave them. Every input came from the same source. Nobody in the chain was scoped, equipped or economically motivated to pick up the phone and call T-Mobile's AP department to ask: "Do you actually owe this company money?"

And here's what I find telling. When the fraud was discovered, Alter Domus wasn't sued. They filed the lawsuit against Brahmbhatt on behalf of the lenders. The collateral agent is contractually shielded. Compare that to a factor, where every fraudulent invoice is the factor's direct loss. Skin in the game changes the way you verify.

The process worked exactly as designed. The design just never included verifying the receivables were real.

I keep thinking about what would have happened if Brahmbhatt had walked into a factoring company instead of a private credit fund.

A factor buys the invoice. Owns it. Files a UCC, sends a Notice of Assignment. A verification clerk calls the debtor: "Do you owe Broadband Telecom $142,000 on invoice #4521?" T-Mobile says, "never heard of them." That's a Tuesday afternoon, not a five-year fraud. The factor collects directly from the debtor's actual bank account. Cash arrives or it doesn't. You can fabricate an email domain. You can forge a contract. You can't fabricate a wire from T-Mobile's treasury. Cash flow is the ultimate verification, and factoring's direct collection model gives you that for free.

The structural difference is simple. In factoring, the lender is the verifier, the collector and the capital provider. Same entity, same incentive, same line of sight. In ABL private credit, those functions are unbundled across fund manager, collateral agent, auditor and borrower. Every unbundled layer creates a gap. Brahmbhatt found all of them.

This isn't a one-off, either. First Brands went down with billions in undisclosed debt and double-pledged collateral. Tricolor, same story. MFS in the UK had a £930 million collateral shortfall - pledging the same properties to Barclays, Jefferies, Apollo, Santander and Wells Fargo simultaneously. Four major collapses in twelve months. The private credit market is $3.5 trillion and growing fast, with asset-backed finance one of its hottest sub-sectors. More capital is flowing into receivables-backed lending through structures that have thinner operational controls than a 10-person factoring shop.

HPS isn't a careless lender. They're one of the most sophisticated credit firms on the planet. If they couldn't catch invoice fraud that a verification clerk would have spotted in an afternoon, the problem is architecture.

Now - factors aren't immune. Clients submit fake invoices to factors too, and it works more often than anyone likes to admit. Only about 20% of factors verify invoices on an ongoing basis. Verification drops off as relationships mature. Spot-checks on 5-10% of invoices and trusting the rest is common practice. The operational model catches fraud faster, but only if you actually run it.

Honestly, the HPS case gives us a useful checklist to hold against our own practices. Three things worth asking:

Are payments coming from the debtor's actual bank account? Brahmbhatt recycled loan proceeds through collection accounts to simulate debtor payments. Factors who rely on aggregate cash posting without tracing payment origins back to the debtor have the same blind spot.

Are you verifying against contact information you sourced independently? HPS emailed "customers" at addresses Brahmbhatt provided. The replies came from people he controlled. If a client gives you a debtor contact and you use that contact for verification, you're verifying with the borrower's own network. Source AP contacts independently.

How much scrutiny are your long-tenured clients actually getting? A factor doing sample-based verification on a mature client has more in common with HPS than they'd probably like to hear. The first invoice gets scrutinized. The five hundredth doesn't. That's where verification discipline matters most - and it's where it's most likely to lapse.

The head-start factoring has over private credit is real. But it's earned daily through operational discipline - calling the debtor, matching the payment, touching the invoice. The moment that becomes a box-ticking exercise, the gap starts to close.

As more capital chases receivables-backed returns, the verification question is only getting bigger. Factoring has spent decades building the infrastructure to answer it. The industry should double down on that; not let it atrophy. Because right now, there's a $430 million reminder of what happens when nobody picks up the phone.

About Anthony Eden

Anthony Eden has spent his career at the intersection of credit lending and technology transformation. Previously at Cerberus Capital Management, he led initiatives across banks, NBFIs, and private credit funds in Europe and the US to adopt new technologies in compliant ways that reduce operational and fraud risk - generating over $15m in top-line revenue for his clients. He is now the CEO and co-founder of Iridium Credit, a technology platform that enables scaling factors to grow without proportionally scaling headcount. Anthony holds an MEng from Imperial College London and is a member of the IFA. He can be reached at anthony@iridiumcredit.com.

The views expressed in the Commercial Factor website are those of the authors and do not necessarily represent the views of, and should not be attributed to, the International Factoring Association.