Trafigura Group has revealed that it stands to lose more than half a billion dollars after discovering a "systematic fraud" committed by a group of companies connected to and apparently controlled by Prateek Gupta, including TMT Metals and companies owned by UD Trading Group.

People familiar with the matter say the allegedly fraudulent shipments were not financed by any letters of credit (L/Cs) or other transactional financing from banks, the Bloomberg news agency is reporting.

Trafigura has commenced legal proceedings against Indian businessman Gupta and the companies involved.

Misrepresentation and false documents

The fraud concerns containerised nickel in transit during 2022 and involved misrepresentation and presentation of a variety of false documentation according to Trafigura.

It describes the fraud as isolated to one specific line of business and says it has seen no evidence to suggest that anyone at Trafigura was involved or complicit in this illegal activity.

No nickel

Since late December 2022, a small proportion of the containers purchased from the Gupta companies have been inspected as they reached their destination, and were found not to contain nickel according to Trafigura.

It says however that the majority of the shipments remain in transit awaiting further inspection.

Exposure covered

Nonetheless, the group has recorded a US$577 million charge in the first half of 2023 for Trafigura Group, estimated to be the maximum loss exposure related to this fraud.

The group's net profits in the first half of its 2023 financial year are expected to exceed first half 2022 net profits, notwithstanding this impairment according to a statement issued by Trafigura.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.