A whistle blower at embattled Swiss asset manager Gam Holding was prompted to alert the financial watchdog last year over concerns about the purchase of more than £500m of bonds from steel tycoon Sanjeev Gupta.
The bonds were related to a biodiesel fuelled power generating business, and the whistle blower believed the operation was unlikely to make enough money to repay the bonds, Reuters reported, citing people familiar with the matter.
Reuters said analysis of corporate filings, regulatory documents and market data supported that view.
Gam fund manager Tim Haywood, who was suspended last year over undisclosed risk management and record keeping issues before being sacked in February, paid more than £550m in 2017 for the bonds that were due to repay about £1bn over 20 years.
However, the assets backing the bonds cost around £22m to install, and the generators have been unused for around two years, Reuters said.
Gam had confirmed it suspended and then fired Haywood after an internal whistle blower alerted the Financial Conduct Authority, however no further details were given about what the concerns were.
British businessman Gupta is the executive chairman of GFG Alliance. Both Gupta and GFG declined to comment, Reuters said.