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dot-org when German miners first Covered Nickel in the 15th
century. They named it cooked for a
nickel or Devils copper. Because while they taught it
contained copper, they couldn't recover any from it.
They blame their troubles on the devil.
And since they're nickel has had the nickname, The Devil's metal
amongst commodity Traders. It's had a history of devilish
Behavior to last week. Traffic Yura.
One of the world's largest commodity trading firms,
announced a five hundred and seventy seven million dollar,
right? Town claiming that they had
fallen victim to a systematic fraud in the devil's metal more.
Surprisingly, though, to Industry, insiders was who they
were dealing with pratik Gupta of 43 year old Indian
businessman with a checkered reputation who had been trading
with traffic. You're a since 2016 traffic,
you're a discovered that shipments of nickel that they
purchased from Gupta. Linked companies, contained no
Trace. S of the valuable metal leading
them to launch legal action against Gupta and secure 625
million dollar freezing order against his business Empire
court documents. Show that the alleged fraud Drew
in Citigroup, who financed the trades?
Barclays were gupta's companies held accounts that receive
traffic Yura funds and that the Scandal could reach even deeper
into the world of Commodities as traffic.
You're a say that they sold. On potentially faked nickel.
Car goes in 11 trades worth almost 100 million dollars.
The 25,000 tons of missing nickel is not a small amount.
It comes to more than 10% of the annual Imports of China.
The dominant Global nickel consumer, the alleged fraud
involves trades in nickel, which was in transit during 2022 and
allegedly involved, all sorts of scheming misrepresentation.
And Counterfeit documents. Now, the scam of delivering
metal that isn't what it's supposed to be is no new idea.
The British museum has an almost 4,000 year-old clay tablet on
display in which a Babylonian Merchant calls out a supplier
for trying to cheat him on a shipment of copper clay.
Tablets were the Twitter of that time clay, tablet.
Beefs, were quite a thing in ancient Babylonia.
The Babylonians didn't have formal Metrics for Metals.
But the merchant in question, knew he had been scammed and
warned his supplier via clay tablet that from now on, I will
not accept any Copper from you. That's not fine quality.
It's amusing that he knew he had been ripped off, but was still
planning on doing further business.
With the supplier. In more recent times, Metals
trading has continued to be a venue for fraud last year in
China alone, 500 million dollars worth of copper, went missing.
Ting and traffic. Your is nickel, Scandal follows
hot on the heels of the lme nickel trading scandal.
From March of last year, when the London Metal Exchange, had
to suspend nickel trading for fear of a total Market collapse.
This situation is quite a large fraud and it could work out to
be quite far, reaching the news calls, the price of nickel to
rise by around six percent on the day of its announcement as
it meant that there was Complete less copper available to
Industry than was previously. Estimated at 25 thousand ton
black hole has just opened in the nickel supply chain.
So, who are the two parties to this dispute?
Well, traffic, your is a multinational commodity trading
company based in Geneva, Switzerland, it was founded in
1993 and operates in more than 50 countries.
Around the world, they specialize in trading a wide.
Age of Commodities, including crude oil, refined petroleum
products Metals minerals and agricultural products.
They've become known for some controversial activities
themselves to including their involvement in a pollution
scandal in 2006 and their attempted use of a super
injunction in the UK to prevent the Press from reporting on it.
In addition, to its commodity trading activities traffic, your
is also involved in other business.
Areas like Logistics infrastructure and finance.
The company is one of the largest independent oil and
metal trading companies in the world, and there's annual
revenues in excess of 147 billion dollars.
Just, two months ago, traffic, yours top Traders.
And shareholders were celebrating having been awarded
a wooden point. Seven billion dollar payout as
profits boomed during the energy crisis.
The Firm made a record seven billion dollars.
Net profit last year. Trafficker is not a publicly
listed company. It's owned by 1100 shareholders.
Many made up of Executives and Traders at the privately held
firm the company still publishes, its annual accounts.
And you might wonder why they would do this as a private firm.
Well, every commodity trading house has a different Edge and
traffickers Edge is in financing.
Both in the Wade finances itself.
And the financing deals. It can offer its counterparties.
They publish their accounts so that they can show their
strength and because of that strength access huge amounts of
financing from Big Global. Landers.
The firm is reported to have seventy three billion dollars of
credit lines from 140 different lenders.
Okay? So, what about pratik Gupta and
TMT? Well, pratik began his career.
As a trainee at his father's medal, Trading Company urged of
international where he became a managing director in 2008.
Now it's easier to get promotion when it's your father's company.
But nonetheless, welt on the company became insolvent in
2018. After defaulting, on loans.
From several Indian Banks. The Wall Street Journal reports
that many people in the Commodities industry.
Steer. Clear of pratik Gupta and his
businesses due to his reputation in the industry.
Pratik Gupta has ties to Sanjeev Gupta, who's gfg Alliance Group
of companies is implicated in the green fill Scandal that I
covered a while ago, on this channel gfg, Alliance is under
investigation by the UK serious, Fraud Office for its involvement
in that Scandal. While Sanjeev Gupta, is not a
relative of prateek Singh, despite sharing the same
surname, Sanjeev is a former shareholder in ocean.
Dev as would pratik gupta's alleged fraud on traffic Yura.
Many of the suspect gfg invoices involved in the green cells
gamble involved, shipments of nickel to I should point out
that gfg has announced that it has for years had no business or
relationship with pratik Gupta and is in no way connected to
any of the activities traffic, yours announcement referenced.
So bankers at Credit Suisse Who were, of course, helping manage
mr. Gupta's welt introduced him to
TMT a small trading firm based in Switzerland less than 10
years ago. He went on to buy the firm in
early 2016. TMT had a good reputation in
Swiss Financial circles before being purchased and crucially
had existing credit lines in place.
They also had a trading relationship with traffic Yura,
those credit. Lines.
Soon, shrunk under the new ownership as certain
counterparties backed away and TMT allegedly began asking
counterparties for longer payment terms saying they were
willing to pay high interest rates.
Some counterparties told the Wall Street Journal that they
viewed this as a red flag and declined to deal with TMT in an
unrelated case, the State Bank of India accused pratik Gupta
and other business associates of Is of being party to a criminal
conspiracy, the bank claims that the fraud cost it and other
lenders to ish, Dev The Firm, founded by his father, nearly a
hundred, and seventy five million dollars at today's
exchange rates investigators in India, say that they recovered
incriminating documents. And articles after opening a
fraud investigation based on a complaint from the State Bank of
India. Unfortunately, by the time, the
Central Bureau of Investigation, Vestigation opened its probe
trafficker was already heavily exposed to mr.
Gupta and his related companies. Okay, so traffic Europe began
trading with TMT Metals more than a decade ago.
They provided Transit Finance to TNT and two other Gupta.
Companies, essentially buying Nickel in containers that were
already on board ships and then selling it when the ship's reach
their destination, charging interest for the duration of The
transportation in 2021 transit times for containers at Sea
expanded and this was partially just due to the supply chain
disruptions that were occurring at the time, but some TMT
shipments took more than 300 days to be delivered.
This was significantly longer than made sense for any global
Shipping route and was difficult to explain traffic Europe, began
reviewing, its relationships with various trading partners
last year and the risk management team started to pay
more attention to TMT Metals, especially when authorities in
India accused Gupta of defrauding.
The State Bank of India, in October of last year, Citigroup
declined to finance. The trades between traffic your
and grouped as companies anymore.
Meaning the traffic you are was now financing the traits itself
which led to traffic, you're investigating their counterparty
more thoroughly in. Know, Remember according to
court documents, an informant told traffic Yura that one or
two of the purchased containers contained, something other than
nickel, the fraud was exposed when the company's investigators
arrived at a port in Rotterdam, just before Christmas.
And check the contents of a container and found other less
valuable Metals. But no nickel inside, when the
trading house confronted Gupta, he told the head of nickel and
Cobalt All trading that the containers contained, mostly a
cheaper nickel alloy and the small amount of other materials,
rather than the high-grade nickel metal that had been paid
for Gupta. Initially, blamed his business
partner in India for the mix-up. And claimed that the contents
were different to avoid sanctions on shipping Russian
nickel, despite no such sanctions ever having been in
place at a meeting in early January, Gupta proposed.
The some it owed traffic Europe but the firm instead decided to
pursue a fraud claim and to request that the courts freeze
gupta's acids, it probably made more sense to have assets Frozen
than to give Gupta time to pay or find a way of not paying in
many ways. This story is pulling together,
a number of pieces that I've covered in the past, on this
channel, like the trading issues on the lme less than a year ago,
the green cell scandal Which is still ongoing and the content on
supply chain disruptions and economic effects of the war in
Ukraine. There's been quite a bit of
fraud in the nickel Market over the last few years for a few
reasons but mostly that it's a highly priced industrial metal
currently worth around 26,000 dollars per ton and it has
become highly financialized. It surging value is a crucial
metal used in the production of electric car.
Batteries has made it an attractive Target for
questionable. Dealings some examples.
Well, a nickel repo deal between the taxes and marik's fell apart
in 2017, when it turned out, that it was based on false
receipts for metal, stored by access world.
Then a part of glencore, after a two-year legal battle in
attacks, has worn a 32 million dollar claim against marik's in
2019, Edie and F mom. One, a 283 million dollar fraud
claim last year, against a Singapore, commodity Trader
straight for a fund. Also involving fake nickel
Warehouse receipt, Singaporean prosecutors have filed 105
charges against an alleged Ponzi schemer.
Accused of cheating, investors out of over a billion dollars
for fictitious. Nickel traits to even in the
Greenfield case where Sanjeev Gupta is.
LG alliances being investigated by the UK serious, Fraud Office.
Many of the suspicious invoices involved shipments of nickel so
far out of 1104 containers, traffic, your has checked 156
and despite what Gupta told traffic Yura.
No nickel of any grade at all has been found in them.
The containers were filled with carbon steel, a low value metal
worth less than a thousand dollars per ton.
Versus the roughly 26,000 dollars per ton for nickel
industry. Insiders have expressed
considerable surprise. The traffic you are was dealing
with Gupta at all Jonas, Ray, the chief executive of Athena
intelligence told the Ft that he had investigated TMT in the
past, over an alleged scheme, involving a network of
companies, trading between themselves, each with different
bills of lading and their own finances.
Their reputation was horrendous. He told the Ft TMT Metals was
blacklisted from most credit and insurance companies.
As they were such a high-risk entity traffic, your has said
that there's no evidence that any of its employees were
complicit in the fraud. An impairment charge of up to
five hundred and seventy seven million dollars.
Will be recorded by traffic. You're on the first half of 2023
related to this alleged Good fraud, that's equivalent to more
than 8% of the seven billion dollar.
Net profit, the company made in its 2022 Financial year, its
best year on record. While the alleged fraud has
drawn in firms, like Citigroup who financed some of the trades
and Barclays where gupta's companies held accounts, they
are unlikely to have been materially impacted the Scandal
is likely to cause Banks to increase the scrutiny and risk
management procedures. Around dealing with firms, like
traffic Yura. This could impact their
financing Edge in the Commodities industry which would
really matter to traffic Yura. It's not clear.
What will happen and who will take the head on the potentially
faked nickel. Cargoes the traffic you are
unwittingly sold on in 11 trades worth ninety four million
dollars. It's also not yet clear if
traffic, your is the only firm to have been tricked in this
manner by gupta's far? Firms will have to wait and see,
if more news comes out, it's somewhat amazing to me that
someone would run a fraud like this where they're guaranteed to
be called once the containers are open.
But, who knows? Corporate filings show that an
investment vehicle of artists Financial trade Finance,
startup, backed by private Equity, Firm, TD, or capital is
a secured lender to TMT Metals for receivables financing.
The company's website states that only the most meticulously
risk assessed and commercially viable transactions.
Make it through to the artist investment committee.
This transaction seems to have made it through two though.
Traffic, you're a says that they have yet to decide whether to
claim insurance or not. It's probably too early right
now to do. So as they haven't examined, all
of the metal inventories yet and they have to still see how Gupta
response to their Claim experts are saying that it may be
difficult for traffic your to recover their losses, through
the court system, given the complexity and ownership
structure of the web of companies.
It claims are behind the alleged fraud, Ian Milne, who was
responsible for, trying to recover, debt from gupta's, UD
trading for trade, Finance fund, trans-asia private Capital told
the press that traffic yura is likely to struggle to collect
money from The as well. Gupta might have a lot of money
out there. Most of it is not in its name.
After this flurry of fraud in the metals industry, over the
last few years, things are likely to change somewhat as
lenders. Increase their scrutiny of who
they deal with and the risk management procedures in place
scandals like this are likely to make Banks even more wary of
lending against nickel trades and a time when commodity
financing in general has been ranking outdated ways of doing
business like paper documents, and email will need to be
replaced with more robust approaches.
If fraud is to be reduced in the industry, please don't suggest
blockchain. And the comment section as the
goal is to reduce the amount of fraud not to just draw in
different types of fraudsters. Thanks for listening to this
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