Trafigura was victim of a nickel fraud on a grand scale, judge says

Trafigura Group was the victim of a nickel fraud “on a grand scale” perpetrated by tycoon Prateek Gupta, a London judge ruled, giving the trading house a chance to recoup some of the hundreds of millions of dollars in losses it suffered.

The ruling marks the latest chapter in a saga that’s run since 2023 when revelations broke that Trafigura, the world’s biggest metals trader, was facing losses of almost $600 million having discovered containers of nickel it had bought from Gupta in fact contained low value substitutes.

The discovery led to fallout across the nickel market and also within Trafigura where senior members of its vaunted metals division were fired. At the time, questions were also raised about the company’s internal controls and processes given Gupta was well known as a risky counterpart across the metals industry.

On Friday, Judge Pushpinder Saini declared that the tycoon duped Trafigura by pretending his firms were selling nickel when in fact the cargoes contained worthless materials. The judge rejected Gupta’s accusation that Trafigura’s own executives were aware of the scam.

The judgment “comprehensively finds in favor of Trafigura and recognizes the systematic fraud perpetrated by Mr. Gupta,” Trafigura said in a statement. “We are continuing to pursue recovery from Mr Gupta.”

Lawyers who previously represented Gupta didn’t immediately return messages seeking comment.

The decision sets Trafigura up for the next phase of a multi-year effort to pursue Gupta over the losses. At the beginning of the trial, Trafigura’s lawyers said the company had clawed back less than $10 million by selling the contents of around 100 cargoes it was left with when its relationship with Gupta unraveled.

The trial marked the first time Gupta spoke publicly about the missing metal, where he said there was “no deception” and that Trafigura executives were aware many of the cargoes shipped to it did not contain the goods they were supposed to. Speaking from Dubai, he told the court that he didn’t know where much of the money had gone.

The judge was sharply critical of Gupta saying that he did not find him to be an honest witness.

“By the end of his evidence, I had concluded that I could not rely on his oral or written evidence in respect of any of the material issues I need to decide,” the judge said.

Gupta had alleged that senior Trafigura executives including Harshdeep Bhatia and Socrates Economou who were at the time Trafigura’s senior metals trader in India and the head of its nickel trading book, knew that what they were buying was not London Metal Exchange brand nickel.

The ex-Trafigura employees “are wholly innocent of any wrongdoing,” the judge said. “They knew nothing of the fraud, and are themselves in a sense victims of Mr. Gupta’s fraud.”

(By Jonathan Browning and Archie Hunter)