Trafigura has alleged it has been the sufferer of a “systematic fraud” and faces a writedown in extra of half a billion {dollars} after discovering shipments of nickel that it bought didn’t include the metallic.
The commodity dealer mentioned in a statement on Thursday that it had lately found the alleged fraud and had begun authorized motion towards a gaggle of corporations “related to and apparently managed” by Dubai-based metals dealer Prateek Gupta, together with TMT Metals and corporations owned by UD Buying and selling Group.
It added {that a} small proportion of containers bought from these corporations had been inspected since December and that they didn’t include nickel. It added that almost all of the shipments had been in transit and “awaiting additional inspection”.
Privately held Trafigura, one of many world’s largest commodity merchants, has shut relationships with dozens of banks that present billions of {dollars} of financing that assist underpin its every day operations.
An impairment cost of as much as $577mn shall be recorded within the first half of 2023 associated to the alleged fraud, which Trafigura mentioned concerned “misrepresentation and presentation of a wide range of false documentation” by the businesses.
TMT Metals describes itself as a non-ferrous metals, minor metals and ferroalloys buying and selling service provider. UD Buying and selling Group’s web site says its is a part of UD group, which operates in metallic buying and selling, wind energy era and mining and has revenues in extra of $4.5bn and a presence in 9 international locations.
TMT Metals Holding lists Gupta, an Indian nationwide and United Arab Emirates resident, as a director, based on UK Firms Home data.
TMT Metals, Gupta and UD Buying and selling didn’t instantly reply to requests for remark. No TMT Metals consultant responded when the Monetary Occasions on Thursday visited the shared workplace the place its London enterprise relies.
Nickel is essentially the most extremely valued base metallic, rising 6 per cent on Thursday to greater than $29,000 per tonne in contrast with roughly $9,000 for copper. Gupta’s corporations and Trafigura traded about 25,000 tonnes of nickel however a number of the cargoes had been discovered to have held metallic of far decrease worth than nickel, based on individuals aware of the matter.
The nickel market spiralled uncontrolled final 12 months following Russia’s invasion of Ukraine, prompting the London Metallic Change to droop and cancel trades.
Metals buying and selling has been stung by a variety of frauds in recent times. Final 12 months in China alone, $500mn value of copper shares went missing and Maike, the nation’s largest copper dealer, was hit by a liquidity squeeze after utilizing metallic to lift financing that was invested into actual property.
The impairment marks a probably vital hit to Trafigura’s earnings, equal to greater than 7 per cent of the file $7bn internet revenue the corporate made in its 2022 monetary 12 months.
Trafigura mentioned, nonetheless, that its first-half revenue for 2023 was nonetheless anticipated to exceed that of the identical interval a 12 months earlier, suggesting the corporate is heading in the right direction for one more sturdy 12 months.
It added that there was no proof to counsel that any of its merchants had been complicit within the alleged fraud.
Socrates Economou, the group’s head of cobalt and nickel buying and selling, is leaving the corporate, based on individuals aware of the matter. Economou declined to remark.
Trafigura’s earnings have surged in recent times on the again of more and more risky power markets.
