One of five individuals charged with various fraud offences in relation to the activities of collapsed Anglo-Iranian steel trader Balli has denied allegations that the company secured letters of credit (L/Cs) for the benefit of steel companies in a last ditch attempt to raise funds.

According to prosecutors, neither Balli nor the companies actually traded any steel in several transactions. Instead, after taking a small cut, the companies immediately repaid the L/C proceeds to Balli, which was kept afloat for months in 2012 and 2013 by raising further trade financing in a similar manner.

Unaware of liquidity crisis

Melis Erda, a former treasurer and member of the Balli's executive committee, told the court she did not know that the company was using the L/C proceeds to repay outstanding amounts of previous trade finance loans.

The former treasurer also said she was unaware at the time of how serious the liquidity crisis was at the firm. It eventually collapsed in spring 2013, owing creditors £315 million (US$383 million).

Trade finance banks misled

"Trade finance banks that have lent Balli money to fund individual steel purchases have been misled and documents have been forged as part of an overall plan to induce these banks to continue lending to Balli to keep the company running," prosecutor Jane Bewsey told Southwark Crown Court.

"This trade finance was used to repay outstanding amounts of previous trade finance loans. In this way, the lack of profitable trading, or lately no trading at all, has been hidden from trade finance banks," she concluded.

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