On an ordinary day, a finance attorney does what we all do between meetings: scroll LinkedIn. Among the posts, there's movement around a company she knows all too well, because weeks earlier she signed the term sheet to finance it, representing the lender. Something doesn't add up. She pulls the thread, asks around, digs. And confirms it: the borrower was setting up a sister company to raise another financing with another lender, in parallel and in silence.
Were they planning to tell her? No. Would the lien searches, the public searches that exist for exactly this, have shown it? Possibly not either.
The deal was saved by the feed.
The attorney is Mehak Rashid, co-founding partner at LegalScale and head of its debt finance practice, a guest on our podcast All You Can Debt. And her story leaves an uncomfortable conclusion about the most sophisticated credit market in the world: the signal that prevented a potential double pledge didn't come from the legal system. It came from a social network.
Let's play hide the debt
To understand why the system wouldn't have raised the alarm, let's flip the roles: you're a borrower who wants a second financing without your current lender finding out. You have three moves.
Move one: take the new debt against the same SPV that's already financed. Bad idea. The new lender files its lien with the UCC, any search shows it, you get caught in minutes.
Move two: the new lender doesn't file anything. Now your first lender's searches come back clean. The debt exists and so does the claim on your assets, but as far as the public record is concerned, nothing happened. You get caught late, when the numbers stop adding up.
Move three, the master move: the parent creates a new SPV, one your lender doesn't even know exists, and the new debt gets filed there. Your lender can search at the parent level, search at its own SPV level, do absolutely everything right, and never find out. And since almost no contract prohibits the parent from creating subsidiaries, technically you didn't even breach anything.
That master move is exactly the one Mehak uncovered through LinkedIn. The UCC does well what it promises, which is to put the public on notice of whatever someone decides to file. What no one files doesn't exist for the system. And in the opposite direction it's unforgiving: one misplaced comma in a company's name can invalidate a filing that's perfect in every other way. Strict on form, blind to intent.
The portfolio no one watched
The episode's second story is quieter. A lender went on paternity leave. He came back weeks later, opened his portfolio, and found it in default or headed there. No one else had been watching. The surveillance of millions of dollars in collateral depended, literally, on one employee not having a child.
And who answers when that blows up? Mehak's honest reply: everyone passes the buck. In a deal there are three levels of responsibility: whoever brought the transaction and was supposed to understand the assets, the credit committee that approved the risk, and the constant monitoring of the portfolio. The first two have a name, a signature, and minutes on file. The third, in most American structures, is no one's full-time job. It's the task that gets added to the analyst who already has twenty.
What changed after Tricolor
After the frauds, Mehak says, her lender clients' calls carried two questions: how do we know if there's other debt right now? and how do we know the reports they hand us are true? The reaction was immediate: backup servicers that had sat cold for years were activated, and new term sheets started requiring it from day one, not as a right to exercise after the fire.
There was also a deeper recognition, especially among younger funds: that one analyst they hired can't watch every facility. Instead of building internal teams, they started delegating verification to third parties whose only trade is exactly that.
The bottom of the issue is structural. Credit moved outside the banking system, but banks didn't just have capital: they had decades of operational infrastructure, risk systems, auditability standards, muscles built through regulation and survived crises. The non-bank world inherited the assets, not the infrastructure. And the questions that matter are still banking-grade: would the data hold up in a portfolio sale? Is ownership clear? Do the cash flows reconcile against the source?
At Vaas we build exactly that layer: verification of existence, ownership, and cash flows for every asset, connected to the source and operating every day. So that finding out about a double pledge doesn't depend on the LinkedIn algorithm.
The full conversation with Mehak Rashid, including why electronic stock certificates are the biggest legal gap in private credit today and what happens when someone pledges shares they can print ten times over, is on the episode of All You Can Debt.
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