Trafigura says Gupta sought to pass off Russian metal as Indian

An affidavit to the English High Court has claimed that businessman Prateek Gupta told commodity trader Trafigura that he had imported Russian nickel, processed it, and then had rebranded it as Indian to get around financing restrictions on dealings with Russian commodities.

A former Trafigura executive’s affidavit statement has suggested ways that Russian metal might have continued to flow onto global markets after the outbreak of war between Russia and Ukraine last February.

The affidavit forms part of a case Trafigura is bringing against Prateek Gupta that have alleged “systematic fraud” by Gupta’s companies, under which other materials were substituted for nickel that Trafigura had bought.

Early last month Trafigura said that it had booked a $577m charge relating to the substitutions. The court imposed a $625m global freezing order on Gupta and his firms on February 8th. Gupta has said that he plans to challenge this.

A Gupta spokesperson said that the businesses were ” preparing a robust response and that will be made available soon.”

Trafigura’s then head of nickel trading, Socrates Oikonomou, said in the affidavit that Trafigura had been buying nickel from Gupta and several of his companies since 2015, but that after Russia invaded Ukraine late in February 2022, Citi said that it would no longer finance deals with Russian metal.

“Citi stipulated that it would only continue to finance the trades if the nickel which was being traded was not of Russian origin,” Oikonomou said in his affidavit, adding that “Mr Gupta indicated in a telephone call that he intended to comply with this requirement.” Citi declined to comment on the matter.

Gupta later told Oikonomou that he had got around the restriction by having an unnamed partner process nickel imported from Russia into an alloy, the affidavit said.

“The supposed objective behind this was to change the origin of the metal from Russian origin to an Indian (or at least non-Russian) retreated alloy,” Oikonomou said in the affidavit.

Oikonomou noted that, by this time, “Russian origin material was becoming hard to sell in the market and difficult to obtain financing in respect from banks”.

Gupta blamed the unnamed partner for substituting nickel alloy for the high-grade nickel in the Trafigura cargoes, Oikonomou said.

The documents do not make clear the volumes of Russian nickel that was being smelted and rebranded as Indian metal.

After Trafigura began to suspect in October last year that around 25,000 tonnes of metal sold by Gupta’s firms might not be the high-grade nickel Gupta claimed it was, it inspected more than 1,000 shipping containers. The cargoes that Trafigura inspected contained other metals worth only a fraction of the value of nickel, the documents said.

The complexity of the matter in part revolves around the nature of the business relationship between Trafigura and Gupta’s businesses. The deals were essentially a purchase and buy-back operation, with Trafigura “owning” the metal only during transit. The trader had spotted that journey times were taking longer than they needed to, and it was this which led to concerns being raised internally and the introduction of the cargo inspections – unveiling the fake cargoes.