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Indian businessman Prateek Gupta has accused employees of commodity group Trafigura of seeking his collaboration in covering up a multimillion-dollar trading fraud, London’s High Court heard on Tuesday.
In one of the largest scandals to rock the metals industry, the alleged fraud involved a $600mn writedown after more than 1,000 cargoes, supposedly of nickel, were found to contain far less valuable materials.
Gupta himself is accused by Trafigura of being the mastermind behind the fraud.
Trafigura said in a statement that “Gupta’s claims appear to be nothing more than mudslinging to deflect attention from the fraud he admits to committing against Trafigura”.
The company insists that none of its employees knew the containers stored something other than high-quality nickel and said it was duped by Gupta.
The Indian businessman claims Trafigura attempted to hide the fraud from its main lender Citibank, insisting the commodity group devised the scheme, which he was asked by the company to take part in.
Gupta outlined his most comprehensive account of events involving the fraud in the High Court in an appeal against a freezing order of his personal and business assets, which his lawyers described as akin to a “nuclear weapon”.
Gupta claims Trafigura failed to disclose evidence showing its former head of nickel trading Sokratis Oikonomou and senior Mumbai-based trader Harshdeep Bhatia knew of the scheme.
His lawyers sought to undermine an account by Oikonomou, who was fired when the alleged fraud was unveiled in February, which insisted Trafigura employees had no awareness the containers were transporting materials of a lower value other than high-purity nickel.
In Oikonomou’s latest affidavit, he maintained he “absolutely did not devise, know of, or participate in any such arrangement” to trade materials other than high-purity nickel that would be presented as the valuable metal to Citibank.
Citibank had allegedly extended $850mn of credit for trades with Gupta’s commodity trading companies, which would sell cargoes of nickel to Trafigura and buy them back after 90-180 days in transit in an arrangement called “transit financing”.
Gupta’s lawyers argued in court that Trafigura’s management would have known Oikonomou’s claims that he was unaware of the fraudulent scheme were “implausible” if they thought about it for any period of time.
Transcripts of WhatsApp conversations, released by Gupta in court on Tuesday, appear to show how the commodity group applied pressure on the Indian businessman to avoid raising suspicions about the fraud from its own trade finance department and Citibank.
The WhatsApp messages appear to show Bhatia instructed Gupta to break up the sets of entities selling cargoes and buying them back into two separate groups to avoid raising any suspicions. He seems to have praised Gupta in June 2021 on the “good response work to avoid any red flags”.
Bhatia also asked Gupta in WhatsApp exchanges to avoid cargoes from entering warehouses where they would be inspected to avoid revealing the nature of the trades, according to evidence entered by Gupta.
Another Trafigura employee Thibaut Barthelme, head of trade finance for refined metals, sent an email, which was revealed in court, to Oikonomou and another trader Mehdi Wetterwald in October 2022 that appeared to acknowledge the possibility that an inspection of the cargoes may uncover something other than nickel.
“We had Citi on a call again on Friday . . . They are insisting on inspections, which we will have to do on the containers that are arriving at port. This is key for them and we can’t avoid it this time,” he wrote.
“Then the question is do we want to get them involved in the inspection process . . . if we find no materials or if there is an issue, they will know immediately and who knows how they will react.”
Trafigura’s lawyers said the WhatsApp messages and emails do not contain “any statement clearly indicating complicity in the fraud on the part of any Trafigura employee” and dismissed Gupta’s defence as “flawed and frankly desperate”.