The UK's Serious Fraud Office (SFO) has secured convictions of two executives of British steel trading business, Balli Steel, on six counts of fraud.

One of those convicted, Melis Erda, had previously denied allegations that she fraudulently secured letters of credit (L/Cs) for the company's trading activities in a last ditch attempt to raise funds for the beleaguered steel trader (DC World News, 13 January 2023).

No steel traded

Balli Steel bought and sold steel around the world using short-term loans from trade finance banks to fund its deals.

But according to prosecutors, neither Balli nor the companies actually traded any steel in several transactions.

The company collapsed in 2013, having amassed debts of around US$500 million to over 20 creditor banks, triggering an investigation by the SFO.

Banks deceived

SFO investigators exposed how two of the defendants, executives Melis Erda and Louise Worsell, conspired to deceive trade finance banks by providing misleading information, false shipping documents and forged signatures on fake sales contracts.

This allowed Balli to obtain a string of loans to bolster the company's finances and continue trading, while avoiding the repayment of many of these loans.

By February 2013, this had led to a cumulative loss of approximately US$150 million for five banks, including a debt of over US$100 million owed to the Development Bank of Singapore.

International co-operation

The investigation involved what the SFO describes as a "record-breaking degree of international co-operation."

Law enforcement partners in 36 separate countries including Belgium and the Netherlands provided evidence and information, more than any previous SFO investigation.

Convictions

Melis Erda, Balli's group treasurer and Louise Worsell, managing director of Balli Steel Middle East, were both convicted on multiple counts of conspiracy to defraud.

Nasser Alaghband, former director of Balli Group and CEO of Balli Steel, pleaded guilty to fraudulent trading prior to the trial.

The SFO statement, Serious Fraud Office secures three convictions in $500 million trade finance fraud, can be found here.

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