Institutional clients of more than 50 global banks had put money into Greensill Capital, which went into administration in the UK this weekLex GreensillPension funds are at risk of being dragged into the fallout around Greensill Capital because bankers pumped their money into the business lender before it collapsed.
More than 50 global banks provided capital from institutional clients to Greensill, an insider said - with pension funds, major savings firms and blue chip businesses all now caught up in the chaos.
Sources close to the failed lender expect a slew of court cases as the businesses fight with their insurers over who will be landed with the losses.
Greensill filed for administration on Monday after Credit Suisse pulled the plug on a partnership and loan repayments were frozen by its biggest customer, the steel tycoon Sanjeev Gupta.
A source close to Greensill said: "Trade credit insurers and institutional investors will now have a bun-fight over who pays the loss.
"Investors could be left holding the ticket."
It is estimated that Greensill distributed more than $10bn (£7.2bn) of assets a month last year. However, banking sources said major high street lenders including Lloyds, NatWest and Barclays are not exposed to the collapse and no UK lender is facing a material risk.
The burden is instead expected to fall on City firms whose bankers had lodged their money at Greensill for 30 or 60 days at a time. Greensill lent this funding out and then paid a return to the investors.
Any capital in its hands at the time of the collapse is likely to have been lost. Although these losses are insured, wrangling over who pays the bills could drag on for months or years.
Clients such as Mr Gupta have been enthusiastic about Greensill's "reverse factoring" services, a controversial form of cash advance where a company pays suppliers early using borrowed funds.
Greensill, which attracted backing from the Japanese investment giant Softbank, then packaged up the debt and sold them on via banks including Credit Suisse.
The complex structure rapidly unravelled after the Swiss institution froze $10bn worth of funds invested in Greensill debt last week, warning that there was considerable uncertainty about what some of these holdings were worth.
Credit Suisse has now temporarily replaced three employees in its assets management division after the bank was forced to freeze a $10bn group of supply-chain finance funds it had run with Greensill, Bloomberg reported.
Credit Suisse declined to comment.