A shocking revelation has emerged in the ongoing High Court trial of Trafigura v Gupta, where the trade finance team at Trafigura expressed serious concerns about their dealings with Prateek Gupta's companies as far back as 2020. This revelation adds a new layer of intrigue to a case that has already captivated the business world.
The Unraveling Scheme
The trial, now in its second week, revolves around Trafigura's accusation that Gupta sold them containers of what they believed to be high-grade nickel, only to discover later that the cargo contained mostly worthless goods. This alleged fraud resulted in losses of at least $600 million for Trafigura.
Gupta, while not denying the nature of the cargo, has countered that Trafigura was fully aware of and complicit in the scheme. This counter-accusation has set the stage for a complex legal battle.
Early Warning Signs
In a September 2020 email, Thibaut Barthelme, then-head of trade finance for refined metals at Trafigura, described the nickel trading relationship with Gupta's companies as a "strange business." He highlighted the unusually long voyage times, which ranged from 3 to 6 months, and the potential reputational risk if the deal went sour. Barthelme also noted that the end buyers, New Alloys and Minecraft, appeared to be related to UIL, Gupta's collective of companies.
Furthermore, Barthelme expressed concern over the high interest costs UIL was willing to accept and the irregular sales patterns. He sent this email to bring the matter to the attention of senior management, including Camille Trejou, the global trade finance head, and Stephen Jansma, then-global head of structured and trade finance, now Trafigura's CFO.
A Controversial Interpretation
Here's where it gets controversial: Gupta's lawyers have suggested that Trafigura staff were aware of the real situation and proposed an "arrangement" to boost nickel trading volumes. They claim that Trafigura stood to profit from the difference in interest charged to UIL compared to the smaller amount they paid to Citi bank for the same funds.
Socrates Economou, the former nickel trading head at Trafigura, has repeatedly denied any knowledge of such an arrangement. He also refuted Gupta's allegations that he proposed the deal at a 2019 meeting in Dubai.
A Question of Awareness
Louise Hutton, Gupta's barrister, pointed out that at the time of the email, around half of the refined metals desk's trade finance business was with Gupta's companies. She questioned why Economou, who was in talks with Gupta to expand their business, seemed unaware that at least one of Gupta's businesses had recently fallen into insolvency.
Economou defended his position, stating that he was satisfied with the business relationship due to its strong performance over the previous two years. He also emphasized that the increased trade volumes were a welcome development, especially considering the perceived high quality of the nickel at the time.
Hutton presented a document prepared by Gupta for Trafigura, showing a dramatic increase in trade volumes from 17,500 metric tonnes in 2017 to almost 70,000 metric tonnes in 2021. She suggested that such a rapid growth in dealings with a company with a "chequered financial past" was surprising.
Economou responded that the increase was indeed significant and a positive development, given the perceived quality of the nickel.
A Complex Web
The case continues to unfold, with more witnesses set to give evidence. As the trial progresses, it will be interesting to see how the court interprets the complex web of accusations and counter-accusations. The outcome could have significant implications for both parties and the wider business community.
What are your thoughts on this unfolding story? Do you think Trafigura was aware of the alleged scheme, or is this a case of a business relationship gone awry? Feel free to share your opinions and insights in the comments below!
