Lenders Warned to Sharpen Fraud Due Diligence in Private Credit and Asset-Based Lending as Fabricated Collateral Cases Mount

Practitioners specialising in private credit (direct lending by non-bank institutions) and asset-based lending (ABL — facilities secured against a borrower's specific assets such as receivables or inventory) are being urged to tighten borrower due diligence and collateral verification following a series of fraud cases that have attracted significant attention across credit markets. The warning emerged from a panel discussion at the Haynes Boone 2026 Finance Symposium in Charlotte, North Carolina, where lawyers examined emerging issues in lender exposure to fraudulent schemes. Panellists highlighted a pattern across recent and ongoing bankruptcy cases involving three recurring fraud types: fabricated receivables (invoices or debts that do not exist), double-pledged collateral (the same asset offered as security to multiple lenders simultaneously), and accounting irregularities that distort reported borrower performance. These schemes have proven particularly damaging in private credit structures, where the absence of public market disclosure requirements can allow fraud to persist longer than it might in regulated bank lending. The rising scrutiny is timely. Private credit has expanded rapidly as a share of corporate lending, with non-bank lenders now providing a significant portion of mid-market and leveraged finance. The structural features that make private credit attractive — speed, flexibility, bilateral negotiation — also reduce the number of independent checks on borrower representations. Fraud risk in ABL structures requires lenders and their advisers to conduct deeper verification of collateral pools, often including third-party audits of receivables books and field examinations.