Gupta says Trafigura employees proposed substitution of nickel with cheaper material

Prateek Gupta, the businessman that Trafigura has accused of being behind a $590m nickel fraud, has said in his defence that it was in fact the global commodity trading giant that “devised and proposed” the scheme.

Gupta’s defence filed with the High Court, alleges that certain Trafigura employees first proposed trading other materials that would be presented to Citibank as nickel trades, according to court filings in London on Wednesday July 12th.

In February Trafigura issued a worldwide freezing order on Gupta. Trafigura said that it had been the victim of a systematic fraud perpetrated by Gupta. It said that more than 1,000 containers claimed to contain nickel in fact contained materials of a much lower value.

Trafigura responded that it did not consider this claim to be credible.

Dubai-based businessman Gupta’s claim marks the first time he has taken an official position on the case, which is due to be heard in London’s High Court. Gupta also named two individuals in the court filings as the pair who proposed the scheme – Trafigura’s then head of nickel Sokratis Oikonomou, and a senior Mumbai-based trader, Harshdeep Bhatia.

Gupta claims that in March 2019 Bhatia said that Trafigura wanted to increase its nickel trading volumes to 50,000 tonnes a year. In May 2019 Bhatia was said to have discussed with Gupta over WhatsApp whether to include in the proposal the possibility of adding non-nickel elements to the volume traded, in order to meet Trafigura’s desired trading volumes. Gupta is said to have met the pair in a Dubai hotel, He alleged that they said that the actual purity, specifications and value of the “nickel” traded was not important to Trafigura.

Gupta’s argument is that he thought as a result that there was “a need” to make it look as if Trafigura was trading nickel because Citi, the financing bank was generally not prepared to extend credit for trades of nickel of less than 99.8% purity.

Gupta appears to be admitting that Trafigura and Gupta worked together to deceive Citi, but Gupta is not admitting that he deceived Trafigura – or at least, two specific employees of Trafigura.

Under the alleged scheme, Gupta’s companies would buy nickel, alloy or scrap from other metals traders, which would be sold on to Trafigura, mostly (by 2022) as “buyback” transactions, which left Trafigura with no physical liability when it came to the actual material in the containers.

While Gupta admits being legal controller of four firms facing Trafigura charges, he denies being controller of three others. These other three, says Gupta, were introduced by UIL Singapore’s head of trading Girdhar Rathi “at Trafigura’s request”.

These three were added, says Trafigura (and Rathi agrees) to avoid red flags being raised at Citi because the high volumes of trades were linked only to entities under the same control (Gupta’s).

Whatever the truth of the matter, the whole scheme began to unravel after the price of nickel soared following Russia’s invasion of Ukraine. Trafigura came under pressure to reduce its activity trading nickel. Meanwhile Gupta’s companies were finding it difficult to fulfil their “buy back” agreements in a timely manner. In October 2022 Citi cancelled its $850m credit line to Trafigura, because red flags surrounding the trades were growing. Gupta has claimed that Oikonomou asked him several times to produce containers full of pure nickel in order to placate Citi’s concerns.