Trafigura Group, a major commodity trading company, has reached a settlement in a London lawsuit brought by billionaire brothers David and Simon Reuben over an alleged nickel fraud scandal. The case, filed in June 2023 by the Reubens’ company Hyphen Trading Ltd., accused Trafigura of delivering fraudulent shipping documents when it sold Hyphen a 404-ton cargo of nickel in September 2022 for $8.4 million.

The settlement, reached in May 2024 according to court documents, resulted in the case being dismissed “by consent” after Trafigura paid the Reuben brothers an undisclosed sum. Spokespeople for both Trafigura and the Reubens declined to comment on the specifics of the settlement.

Background of the Nickel Fraud Scandal

In February 2023, Trafigura shocked global metal markets by announcing it expected to lose nearly $600 million in what it called a “systematic fraud” perpetrated by Indian businessman Prateek Gupta. Trafigura accused Gupta of selling it thousands of tons of nickel that turned out to be worthless rubble upon inspection. Gupta’s spokesperson stated he planned a “robust response” to Trafigura’s allegations.

The scandal raised concerns about the use of counterfeit shipping documents, known as bills of lading, in the nickel market. These documents represent legal ownership of commodity cargoes and are often used as collateral for financing. Hyphen’s lawsuit alleged that both it and Trafigura claimed to possess the original bills of lading for the disputed nickel shipment, suggesting at least one set was fraudulent.

Details of Hyphen’s Lawsuit

In its complaint, Hyphen provided a detailed account of its attempts to locate and take delivery of the nickel it had purchased from Trafigura. The 404-ton cargo, loaded onto the container ship OOCL Jakarta in Kaohsiung, Taiwan, was supposed to be delivered to Hyphen in Rotterdam. However, the containers inexplicably remained on the vessel during its return trip to Asia before finally being unloaded in Jeddah, Saudi Arabia.

Hyphen alleged that Trafigura repeatedly ignored or refused its requests for information about the cargo’s location and stonewalled attempts to inspect the goods, citing “logistical complications.” It was only in April 2024 that lawyers for the shipping line OOCL informed Hyphen that the bill of lading it had received from Trafigura was likely fraudulent.

The lawsuit also implicated Techies Logistics (S) Pte, a Singapore freight forwarding company, in the alleged fraud. Hyphen claimed that Techies was listed as the “forwarding agent” on OOCL’s copy of the bill of lading and had ordered the cargo to be sent back to Jeddah after it arrived in Rotterdam. “Hyphen infers that Techies’ actions (whether known or unknown to Trafigura) were motivated by a complicity or other kind of involvement in the Gupta Fraud,” the complaint stated. Techies did not respond to requests for comment.

Ongoing Legal Battles and Implications

While the London lawsuit has been settled, Hyphen and Trafigura remain embroiled in a separate legal dispute in Singapore over another nickel cargo. Trafigura also continues to pursue legal action against Prateek Gupta, with a judge dismissing Gupta’s attempt to lift a freezing order against him in December 2023.

The nickel fraud scandal has sent shockwaves through the commodities industry, raising questions about the security of shipping documentation and the potential for widespread fraud. Trafigura has made staffing and operational changes in response to the incident, but the full implications for the company and the broader nickel market remain to be seen as legal proceedings unfold.

The above references an opinion and is for information purposes only. It is not intended to be investment advice. Seek a licensed professional for investment advice. The author is not an insider or shareholder of any of the companies mentioned above.