Swiss trader Trafigura Group is facing losses of more than $500 million after learning that metal cargoes it purchased did not include the nickel they were supposed to.
As a result of the fraud, the commodities dealers declared a $577 million impairment since the cargoes allegedly containing the nickel the firm purchased contained lower-value components such as carbon steel.
According to Trafigura, the perpetrators of the alleged scam were companies managed by metals trader Prateek Gupta, including TMT Metals and UD Trading Group subsidiaries. The trader announced that it had initiated legal action against Gupta and the entities.
As a spokesperson relayed to The Wall Street Journal, the trading business had dealt with Gupta’s companies without incident for years. However, red flags began to appear in 2022.
Cargoes allegedly containing nickel were taking longer than planned to arrive at their destination, according to a spokeswoman. They were also stopping at more ports than expected, according to the spokeswoman, and the companies were stalling on producing papers.
Trafigura stated that there was no indication that any of its employees were engaged and that it had been misled by fake documents.
Socrates Economou, the company’s head of nickel and cobalt trading, is leaving the firm and appears to have been let go following the more than $500 million fraud.
Trafigura profited greatly from both the commodity market turmoil created by the pandemic and the energy market chaos produced by the Ukraine war. It produced more than $7 billion in profit in its most recent fiscal year, moving seven out of every 100 barrels of oil consumed globally, as well as massive volumes of metal, coal, and natural gas.
The major beneficiaries were Trafigura’s 1,100 senior workers, who shared a $1.7 billion dividend.
Despite the deficit, Trafigura stated that it was on track to exceed its profit from the first half of the previous fiscal year, when it made a then-record $2.7 billion.
Because Russia is a significant producer, the invasion of Ukraine increased the value of nickel. This immediately escalated into a frenzy of price increases on the London Metal Exchange. In turn, the conflagration threatened to bring down a major Chinese producer and burden its banks with damages. Instead, the exchange voided trades, prompting other market participants to file lawsuits.
Nickel prices rose 6.4% on the London Metal Exchange on Thursday following Trafigura’s announcement.
Information for this briefing was found via The Wall Street Journal and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
