Trafigura’s non-existent nickel was bought by a US firm

Bunkering activity. Credit: Trafigura

Trafigura Group sold cargoes of nickel it now believes may not have contained any of the metal to buyers including a US trade finance firm and a state-owned Indonesian mining company, according to court documents.

The question of how far through the market containers of non-existent nickel had spread has been one of the top concerns for traders ever since Trafigura revealed earlier this month that it had been the victim of what it described as a “systematic fraud.”

The trading house said it stood to lose $577 million after paying companies linked to Indian businessman Prateek Gupta for cargoes of nickel, only to discover that they actually held much lower value goods.

While most of the dozens of cargoes involved are owned by Trafigura, Bloomberg previously reported that the trader sold several cargoes on to third parties for $93.9 million.

According to court filings, the buyers of those cargoes were: two trading units of Xiamen C&D, a Chinese state-owned conglomerate; Mind ID Trading Pte, the trading unit of Indonesia’s state mining company; Argentem Trade Services LLC, a trade finance company affiliated with hedge fund Argentem Creek Partners; and Axiom Ltd., a Hong Kong trading company.

While Trafigura has only inspected a relatively small proportion of the more than 1,000 containers it bought from companies linked to Gupta, it has not found any of them to contain nickel.

The court filings show that some of the buyers of the cargoes have also uncovered problems with them. According to the affidavit of Socrates Economou, Trafigura’s former head of nickel trading:

  • Xiamen noticed inconsistencies in the paperwork for its cargoes, and in December Trafigura agreed to buy some of some of them back. In February, Xiamen wrote to Trafigura, suggesting that “the goods are completely wrong,” and “it is a fraud not a simply quality problem.”
  • Axiom wrote to Trafigura in January after inspecting its cargo, saying that there were “large discrepancies/deviations between our mutually agreed contract terms and the material actually supplied.”
  • Mind ID opened several of the containers it had bought from Trafigura in early January and discovered that they did not contain the material specified in the contract.
  • Argentem has been trying to arrange an inspection of its material, which has not yet reached its discharge port.

In several instances, Gupta became personally involved in trying to resolve the issues with the buyers of the cargoes, according to the court filings. He told Economou by Whatsapp message that he was negotiating a “solution” with Axiom, and that he had “verbally offered” a solution to Mind ID involving a letter of credit to secure his obligation toward them.

Trafigura said in court filings previously reported by Bloomberg that it may be liable for the $93.9 million that was paid to it by these third parties.

The four buyers did not immediately respond to emails and phone calls seeking comment. A spokesperson for Gupta declined to immediately comment. The spokesman said last week that Gupta planned a “robust response” to Trafigura’s allegations.

A Trafigura spokesperson said: “This was a systematic fraud perpetrated after a long and legitimate business relationship dating back to 2015 that involved misrepresentation and widespread falsification of primary and supporting documentation. A number of red flags were identified that resulted in this investigation. Any fraud is an opportunity to review and tighten systems and procedures and a thorough review is underway.”

(By Jonathan Browning and Jack Farchy, with assistance from Alfred Cang and Archie Hunter)


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