Letters of credit (L/Cs) reportedly featured in an alleged US$32 million gasoline trade fraud for which two people have now been arrested.

According to the Reuters news agency, the latest to be arrested is Tian Meng, a Chinese commodity trader at Trafigura.

Custody

Tian has been held since August without charge in the north-eastern Chinese city of Cangzhou, the news agency has now revealed.

Chinese law allows for suspects to be held for seven months without charge.

Fraud allegations

Tian was arrested after investigations into complaints made by Chinese trader, Qingdao United Energy (QUE), which alleged that it had lost US$32 million in trade financing deals.

The firm reportedly alleges that Tian struck fraudulent deals with a local derivatives trader, Zhang Wei. The latter was arrested in May.

Reuters' sources say Zhang bought 700,000 barrels of gasoline from Trafigura with L/Cs issued by QUE, only to sell the same amount back to the trading giant at a discount of US$32 million.

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