(Reuters) – Financing group Greensill Capital, which is backed by Japan’s SoftBank Group and General Atlantic of the U.S., last year provided a false statement to market participants relating to bonds it had issued in 2017 on behalf of commodities tycoon Sanjeev Gupta.

The May 2018 statement made to bond market investors and brokers said the Scottish government had approved a guarantee related to a hydro power plant in Kinlochleven owned by Gupta’s GFG Alliance, which the bonds were secured against.

But Scotland says no approval was given, according to a government statement provided to Reuters. The meeting records for the committee that would need to approve such a guarantee, which are available on the committee’s website, do not refer to a 2018 GFG guarantee.

Although the Scottish government had in 2016 provided a guarantee related to an aluminium plant owned by Gupta’s GFG, “no other guarantee has been offered to the GFG Alliance by any Scottish Minister or official,” a spokesman said.

The prospect of government support had been a key reason Swiss asset manager GAM Holding AG had purchased the 220 million pounds of bonds a year earlier, because under the terms of the bonds it potentially meant a near-term repurchase at a higher price, according to three people familiar with the matter. A Scottish government guarantee would allow GFG to repurchase the bonds early, according to representations in an April 2017 pre-sale document outlining the nature of the proposed deal that was produced by Greensill for GAM and reviewed by Reuters.

The false statement marks the latest development related to a series of GFG bonds purchased by GAM fund manager Tim Haywood, who was suspended and then dismissed following an internal whistleblower alerting UK regulator the Financial Conduct Authority.

In response to questions from Reuters, Greensill initially denied producing pre-sale documents relating to the Kinlochleven bonds or any updates regarding a guarantee. The company more recently confirmed it had produced the April 2017 pre-sale document and the May 2018 investor update but said the update “was based upon information provided by GFG.”

Greensill added: “Greensill never knowingly issues false statements and strongly refutes such assertions. The contents of any statements made are believed to be accurate at the time made.”

GFG said it had discussed with advisors and investors the potential for a guarantee related to the Kinlochleven power plant but declined to comment on what specifically it told Greensill.

“GFG did not mislead anyone as to the nature of its discussions about additional Scottish government guarantees. GFG has never informed any party that any such guarantees had been put in place, and we are clear that the Scottish Government made no such guarantees,” said GFG, which is the umbrella group for the Gupta family’s metals, power and banking interests.

Gupta didn’t respond to a request for comment.

Under UK law, knowingly providing false or misleading information about regulated securities is considered market abuse, an offence for which the UK financial regulator can levy large fines and ban companies or individuals from involvement in regulated activities such as the arranging of bond deals, according to Damon Batten, managing consultant with London-based financial services regulatory consultancy Bovill.

There doesn’t need to be a clear victim or loss for regulators to prosecute for market abuse, Batten said.

The amount of due diligence required by bond issuers depends on the situation and their regulatory status, specialists say.

The Financial Conduct Authority, the UK market regulator, declined to comment.

SoftBank didn’t respond to a request for comment. Private-equity group General Atlantic declined comment.

GAM said it did not feel misled by Greensill and declined to comment on what claims had been made about the guarantee.

The asset manager, in a statement, said: “GAM continues to value its on-going relationship with Greensill, as reflected by our joint supply chain finance fund.”

GAM has sold or is in the process of selling around a billion dollars of bonds back to GFG, including the Kinlochleven ones, according to public statements and the three people familiar with the repurchases, who added that GAM wanted to be made whole.

Since GAM suspended fund manager Haywood and placed restrictions on client withdrawals following a wave of redemption requests last summer, it has seen its stock market capitalization drop by more than a billion dollars.

GAM announced Haywood’s dismissal in February, saying he didn’t comply with due diligence procedures and had signed certain contracts by himself where internal policies required two signatures, but didn’t specify the transactions that led to his dismissal.

A spokesman for Haywood said on Friday that the former GAM fund manager denies any wrongdoing. In an April statement to media, Haywood said that the GFG bonds had delivered the profits for fund investments that he anticipated “even if the realisation has been slower than I had expected.”

BILLIONS OF DOLLARS

Australian Lex Greensill, a former banking executive, founded his financing firm in 2011. In recent months, it received an $800 million investment from SoftBank’s Vision Fund, which a source close to the deal said valued Greensill at around $3.5 billion. That followed a $250 million investment by U.S. private equity firm General Atlantic in 2018.

Greensill has helped GFG raise billions of dollars via bond sales to help fund acquisitions, according to a video on Greensill’s website in which Gupta features. That included the 2017 sale of the Kinlochleven bonds.

Haywood told GAM colleagues that he purchased the bonds, which were due to repay investors over 18 years, because he expected to be able to sell them back to GFG in about a year for more than he paid for them, according to the people familiar with the matter. That is because he understood from Greensill that Scotland was likely to provide a guarantee related to the Kinlochleven plant, which under the terms of the bond would enable GFG to repurchase the bonds and refinance with cheaper debt, the people said.

GFG companies are not rated by any major rating agency and carry high debts.

‘UPDATE FROM GREENSILL’

In May 2018, Greensill put on a secure online platform accessible by bond investors and other market participants the memo titled: “Update from Greensill in relation to KLL,” referring to the Kinlochleven bonds.

The update said the Scottish government had had several conditions before granting a further guarantee. It added that those conditions “have been met, and the guarantee has been approved by the First Minister [Nicola Sturgeon] on behalf of the Scottish Government.” Therefore, GFG planned to redeem the bonds, the update continued. Sturgeon has been head of the Scottish government since 2014.

The Scottish government did discuss the possibility of providing an additional guarantee to support the expansion of GFG’s operations in Scotland, according to minutes of an August 2017 meeting between Sturgeon and a civil servant. The minutes were among documents Scotland released following a Freedom of Information Act request filed by Reuters for all information through mid 2018 on Sturgeon’s discussions relating to an additional guarantee. As of March 2018, the most recent documents provided in response to the Reuters request, no approval had been provided.