Control Risk is Back in Private Credit

A $400 million private credit wipeout shows how verification, regulatory durability, and structural control risk are quietly repricing capital.  ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

February 11, 2026   |   Read Online   Dio Pouerie & Bo Nichols FOR PEOPLE WHO WANT TO SEE WHAT BREAKS BEFORE IT BREAKS A $400 million private credit wipeout shows how verification, regulatory durability, and structural control risk are quietly repricing capital.     THE SETUP It is Jobs Wednesday, but it does not feel like a normal Jobs Day.  January nonfarm payrolls print at 8:30 a.m. ET after a shutdown-driven delay, with consensus looking for 55,000 jobs added and unemployment holding near 4.4%. The bar is low, and the sensitivity is high. Futures are inching higher and the Dow is coming off a third straight record close, but the cross-asset posture is more conditional than celebratory.  The dollar is weaker, yields have been drifting lower for days, and the market is quietly inviting a softer growth read to keep the rate path supportive. That split matters for PMD because it is the same split showing up inside deals. Public markets can print new highs while underwriting tightens in the background.  When growth becomes harder to verify, capital does not stop moving. It changes what it pays for. This morning's tape is still clearing. Credit is still flowing. AI is still funded. Energy exports are still rising.  But the repricing is structural. Capital is no longer pricing growth first. It is pricing verification.  In credit, in regulation, in infrastructure, and in product design, assumptions that were treated as durable are being reclassified as provisional. That shift does not show up in the headlines. It shows up in structure. PMD Lens Private markets do not reprice on drama. They reprice when control mechanisms weaken. When verification fails, when regulatory baselines shift, when delivery rights override supply, or when liability definitions blur, capital does not retreat. It recalibrates. Leverage tightens.  Covenants harden. Buyer pools narrow. Duration gets more expensive. The repricing happens in structure long before it appears in earnings.         WHAT MOST PEOPLE WILL MISS Verification risk compounds faster than default risk Regulatory reinterpretation hits IRRs before revenue Physical abundance does not equal access rights Liability definitions can shift faster than engineering fixes Capital reprices control erosion before performance deterioration         PREMIER FEATURE The New Class of "Turtle Traders" Is Emerging Forty years ago, a group of novice traders trained by Wall Street legend Richard Dennis went on to earn more than $175 million — not through instinct, but by spotting institutional positioning before the public. Today, retail traders are gaining a similar edge using Dark Pool A.I. This technology scans secret institutional exchanges to detect where Big Money is quietly building positions — before prices move. When it happens, you get the exact ticker via SMS, instantly. Claim FREE Dark Pool SMS alerts before the next signal hits         SIGNALS IN MOTION Regulatory Standards Are No Longer Static The FDA issued a refuse-to-file letter on Moderna's mRNA flu vaccine, rejecting a large human trial the agency had agreed to review. The issue was not safety. It was the comparator, a standard flu shot the FDA itself had cleared in 2024. Only four percent of filings get this kind of rejection. The stock fell roughly seven percent. The trial met its goals. The data was clean. The framework moved. When a regulator shifts the baseline after capital is deployed and a trial is done, the risk stops being clinical. It becomes structural. Biotech sponsors now face mid-cycle changes to standards they treated as fixed. That delays timelines and reprices the whole thesis. Investor Signal  This is a market rediscovering regulatory duration risk. The mechanism is shifting approval baselines after capital has been deployed. The translation is that clinical success is no longer sufficient without framework stability. In biotech, the rulebook is now a variable input, not a fixed assumption.         Abundance Without Access Is Not Advantage U.S. natural gas output is running at record levels. Production tops 107 billion cubic feet per day. It does not matter. LNG export flows hit near all-time highs in February. Pipeline bottlenecks choke the Permian and Appalachian basins. Industrial users face curtailment despite sitting on top of vast domestic supply. The gap is not about geology. It is about contracts. Export deals, pipeline priority rights, and long-term delivery terms decide who gets gas. Physical surplus does not trump contractual rank. New LNG export capacity is adding even more demand on the same constrained pipeline network. For makers and plant operators, the fuel is there. The access is not. Abundance without delivery rights is a headline, not an edge. Investor Signal  The illusion that production equals access just broke. The mechanism is contract priority outranking commodity abundance. The translation is that delivery rights, not resource volume, determine competitiveness. In infrastructure-heavy sectors, access hierarchy now drives underwriting.         Liability Definitions Are Outrunning Product Design NHTSA upgraded its probe of Ford's BlueCruise to an engineering analysis. That is a required step before a recall. The probe covers more than 129,000 vehicles after two fatal crashes. Both involved  Mach-Es hitting stopped vehicles at highway speeds at night. The system blocks response to still objects above 62 mph by design. BlueCruise is a Level 2 system. The driver is legally in control. But the branding says hands-free. That gap matters.  When product framing runs ahead of legal clarity, the liability line gets blurry.  Courts decide where it falls. Litigation timelines widen. Recall risk compounds. And capital tied to emerging tech with vague definitions now carries a risk premium.  It shows up before product economics break down. Investor Signal  What used to work was assuming product liability scaled linearly with performance. The mechanism now is definitional ambiguity between assistance and automation. The translation is that liability duration risk widens before product economics deteriorate. In emerging technologies, clarity of definition is now a balance-sheet input.         FROM OUR PARTNERS The TRUTH About Trump and Musk? If you think there's something strange about the "feud" between Trump and Musk… You need to see THIS jaw-dropping video… Because it explains what could REALLY be going on behind the scenes… And how it could hand investors a stake in a $12 trillion revolution. Click here now to see the full story.         DEEP DIVE Verification Just Broke BlackRock's private credit arm, HPS Investment Partners, put roughly $430 million into receivables-backed loans to telecom firms run by Bankim Brahmbhatt.  BNP Paribas funded nearly half. The collateral was customer invoices from major telecom carriers. The invoices were fake. Email domains were spoofed. Confirmations were forged. A Belgian telecom firm, BICS, said in writing it had no link to any of the invoices. HPS wrote the exposure to zero. This is not a fraud story. It is a verification failure inside scale-driven private credit. The asset-backed lending market grew fast during a stretch of fierce competition.  Private credit now tops $1.7 trillion globally. When that much capital chases yield, the first thing that shrinks is not pricing. It is standards. Collateral checks become routine.  Document reviews turn into box-ticking. The process was never designed to operate with adversarial rigor against borrowers who look credible. That is how fake invoices lasted for years. Not because the fraud was clever. Because the diligence was not built to catch it. An HPS analyst spotted odd email domains that did not match real firms.  That flag set off a deeper look. CBIZ and Quinn Emanuel found that every customer email used to verify invoices over two years was fake. Four years of lending. Four years of approvals. Four years of documents no one tested against reality. Brahmbhatt's firms filed for Chapter 11 in August 2025. Millions in pledged assets had already moved to offshore accounts in India and Mauritius. He reportedly left the country. BNP Paribas booked about 190 million euros in loss provisions. BlackRock called the loss small next to its $179 billion in assets. The number is not the point. The point is the system. Private credit treated verification as a step in a process. Not as a test. Growth squeezed diligence. The result is not just a loss. It is a crack in the guardrails of a $1.7 trillion asset class that grew faster than its controls. Every lender that relied on similar workflows now faces the same question: would their process have caught this? Verification is the first covenant in duration lending. When collateral credibility breaks, every model built on it has to be re-tested. The loss is contained. The precedent is not. Investor Signal  Private credit built its verification architecture for trust, not for fraud. Competitive pressure compressed diligence as the market scaled past its controls. Collateral credibility is the first line of defense in duration lending. When that line weakens, spreads must widen, even before defaults rise.         FROM OUR PARTNERS Trump's Executive Order 14330: What Wall Street Doesn't Want You to Know When Trump signed Executive Order 14330, he quietly opened a $216 trillion opportunity to regular Americans. And Trump collects up to $250,000 a month through a little known fund directly tied to this boom.  Now you can access it for less than $20.  Get the full story here         THE PLAYBOOK Re-underwrite verification standards in private credit exposure. Treat collateral validation as adversarial, not administrative. Model regulatory reinterpretation risk inside biotech and healthcare. Price infrastructure access rights, not production volumes. Discount technologies operating in definitional gray zones. Assume control erosion reprices earlier than cash flow deterioration.         THE PMD REPOSITION Private markets are not repricing on fear. They are repricing on control.  Verification in credit.  Framework stability in regulation. Access hierarchy in infrastructure. Definition clarity in automation. Capital still moves. But it now demands durability of assumptions, not just growth of projections.  PMD remains positioned for a market where the edge is identifying which structures retain enforceability under pressure, and which ones lose it quietly. In this phase, verification is the spread.       Update your email preferences or unsubscribe here © 2026 Private Markets Digest, a brand of Traders & Quants, LLC. 522 S. Hunt Club Blvd Suite 119 Apopka, FL 32703, United States Terms of Service