Commodities trading giant Trafigura has become the victim of “systematic fraud” that could cost it over half a billion dollars. The company had placed orders for nickel. But the metal cargoes that arrived did not contain the nickel they were supposed to. Instead, they had lower-value materials such as carbon steel. According to a Bloomberg report, Trafigura, one of the world’s largest trading houses, has spent the past two months uncovering the fraud. The company believes that it is facing a loss of $577 million. The figure could come down if the company is able to recover at least some of its funds.
“Since late December 2022, a small proportion of the containers purchased from these companies have been inspected as they reached their destination, and were found not to contain nickel,” Trafigura said in a statement to Bloomberg. “The majority of the shipments remain in transit awaiting further inspection.”
Socrates Economou, Trafigura’s head of nickel and cobalt trading, is leaving the organisation. However, the Swiss trader denied any possibility that some of its own workers could be involved.
Trafigura has accused TMT Metals and subsidiaries of UD Trading Group, companies controlled by metal trader Prateek Gupta of perpetrating the fraud. It has also initiated legal proceedings against Gupta and several companies associated with him.
As per a report in the Wall Street Journal, Trafigura had been trading with Gupta’s companies for years without any issues. But problems began to emerge in 2022 as cargoes took longer to arrive and stopped more frequently at ports. They also took longer to provide their documentation.
A full container of nickel can be worth roughly $500,000. Trafigura is among the companies who are racing ahead to tap into the nickel market. The metal is useful in manufacturing batteries for electric vehicles. However, despite its value, large quantities of the metal are traded in relatively low-security as compared to gold and other metals.
Even with the loss, Trafigura said it was on track to race ahead of its profit from the first half of its previous financial year, when it made a record $2.7 billion.
As for the metals industry, this is not the first time the sector has been rocked by such fraud. A series of alleged frauds came to light in 2020 when the prices of commodities tanked due to the coronavirus pandemic.