Without addressing any bank lending rules and regulations, the following attempts to recap an actual event we're calling Dumb Money:

An importer of brand name products, had successfully completed several millions of dollars of transactions with Transcap.  Observing the success of the transactions, and the amount of the Transcap fees, the company's senior lender, a large regional bank, apparently rationalized that they could and would fund a group of similar transactions involving the purchase of the goods.  While the mutual client had several years experience in importing brand name goods, the size of their transactions had increased substantially because of Transcap's funding, yet the client did not expand its infrastructure to match the increased level of business.

In addition to providing money to the client, Transcap provided backroom support, which included requiring the transactions be structured in an acceptable manner, following certain due diligence procedures and monitoring the transactions as they unfolded.  Unlike the prior transactions funded by Transcap, the structure of these transactions and the due diligence performed were inadequate.

The Ugly Part!!
The brand name manufacturer has sued the client's customer for selling counterfeit goods.  As a result, the client's customer has not paid the client for the goods.  Therefore, the client is unable to repay its 8 figure loan, and the lender has no collateral to liquidate to reduce its position.

The Good | The Not-So-Bad