By Sam Tobin and Eric Onstad
LONDON (Reuters) -Trafigura’s $600 million case against Indian businessman Prateek Gupta over fake nickel cargoes began at London’s High Court on Monday, with the commodities trader saying it was the victim of a fraudulent “Ponzi scheme”.
Geneva-based Trafigura alleges that Gupta was the mastermind of a fraud in which he and his companies agreed to provide high-quality 99.8% pure nickel but delivered low-value or even worthless materials instead.
Gupta accepts that he did not deliver high-grade nickel cargoes but says Trafigura staff devised the scheme, coming up with a complex merry-go-round of transactions that would appear to inflate its standing in nickel trading. Court filings from Gupta’s lawyers say the scheme involved more than 500 trades valued at $3.3 billion.
The trial, at which Gupta and former senior Trafigura executives are expected to give evidence, is the culmination of events that began in November 2022, when Trafigura first received complaints about cargoes it had sold.
‘SYSTEMATIC FRAUD’
After concerns were raised, Trafigura inspected some containers in Rotterdam that were supposed to contain high-grade nickel. Its lawyers say the inspections found that the containers held carbon steel worth a fraction of the value of nickel.
The discovery prompted Trafigura to carry out further inspections, book a $590 million charge and then sue Gupta and his companies in February 2023 for what it then described as “systematic fraud”.
Trafigura’s lawyer, Nathan Pillow, told the High Court on Monday: “Trafigura paid for rubbish and was left with hundreds of millions (of dollars) of losses.”
Trafigura has been left with metal “worth around 2% of what we paid for it” after recouping about $10 million from trades worth more than $500 million, Pillow said.
GUPTA DEFENDING THE CASE
Gupta’s lawyers say that Trafigura executives were always in on the agreement to use financing from Citi to “make money ‘borrowing’ cheap money from Citi and ‘advancing’ it to (Gupta and his companies) at a higher interest rate”.
His lawyers argued in court filings that “so long as the circle kept turning” the parties involved all gained and “nobody suffered”.
They said the COVID-19 pandemic and Russia’s 2022 invasion of Ukraine sent nickel prices soaring and the scheme unravelled when Citi started pushing for the cargoes to be taken back.
Trafigura denies there was any such agreement, with the company’s lawyers saying Gupta and his companies’ defence is “a fiction conceived after the event by admitted fraudsters”.
Gupta remains subject to a freezing order on his assets, which Gupta unsuccessfully sought to lift in December 2023.
(Reporting by Eric Onstad and Sam TobinEditing by David Goodman)
