The man at the centre of the 2014 Qingdao metal warehousing scandal in China that had the impact of making letters of credit (L/Cs) much harder to come by for commodity traders in the region has been jailed.

Chen Jihong was sentenced to 23 years in prison while his company, Dezheng Resources, was ordered to pay a US$438.22 million fine.

More than four years ago, US$3 billion of duplicate storage certificates used by the minerals trader at the Chinese port of Qingdao made banks reluctant to provide L/Cs for commodities traders (DC World News, 2 & 9 July 2014).

Duplicate certificates

Dezheng raised 3.6 billion yuan (US$520 million) in loans, L/Cs and bank acceptance bills from 13 banks by repeatedly using the same cargoes as pledged collateral.

Chen also defrauded multiple companies of over 12.3 billion yuan (US$1.8 million) and was also accused of paying a bribe of more than 8 million yuan (US$1.2 million) to former politician and mining executive Mao Xiaobing who was sentenced to life in prison for corruption last year.

Financial crime

Chen was found guilty on five counts of financial crime between November 2012 and May 2014.

Nine other Dezheng Resources staff members were sentenced to up to 10 years in prison.

The company's assets will be auctioned off and the proceeds paid out to victims of the scam proportionally.

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