Trafigura Nickel Fraud Trial Exposes $600M Scam and Years of Internal Red Flags

Court testimony in the London High Court has revealed how global commodities trader Trafigura was allegedly defrauded of $600 million in a scheme involving non-existent nickel shipments, while internal documents show the company had raised concerns about the transactions years earlier. The high-profile trial, which will hear closing arguments in December, has exposed complex financial arrangements between Trafigura, Emirati businessman Prateek Gupta, and international lenders, raising questions about oversight in commodities trading.

Background and Context

The fraud case centers on what Trafigura described in early 2023 as a "systemic fraud" by Gupta, who owned multiple metals trading companies. According to court proceedings, the scheme involved financing shipments of high-purity nickel that never existed, with containers instead holding worthless scrap metal. The transactions occurred during a period of extreme market volatility following Russia's invasion of Ukraine, which disrupted nickel prices and led to the suspension of trading on the London Metals Exchange for a week in spring 2022.

Key Figures and Entities

Trafigura, the Swiss-based commodities trading giant, began doing business with Gupta's companies in 2014, initially purchasing zinc from India. By 2022, the relationship had evolved to include complex "buyback transactions" where Trafigura would finance nickel shipments, effectively acting as a trade lender. These transactions were initially backed by an $850 million line of credit from Citibank before Trafigura began funding them directly. The case involves multiple companies connected to Gupta, including TMT Metals, which court documents suggest were part of an interconnected network of entities.

Legal and Financial Mechanisms

The alleged fraud operated through a sophisticated series of buyback transactions where Trafigura would purchase nickel for export, technically own it during transit, and sell it back to the original Gupta-owned company at a higher price upon arrival. According to court testimony, these arrangements involved unusually long transaction times—six months or more—and massive shipment sizes sufficient to fill over half an industrial container ship. Internal concerns were raised as early as 2020, with Trafigura's refined metals trade finance head noting in an email the "strange business strategy" and questioning why Gupta's companies would accept such high interest rates when other banks had refused to finance them.

International Implications and Policy Response

The case has shaken confidence in commodities trading finance, particularly among trade finance lenders who suffered significant losses. It highlights regulatory blind spots in cross-border commodities transactions and the challenges of verifying physical assets in complex supply chains. The trial has also raised questions about the adequacy of due diligence processes at major financial institutions and trading houses. Gupta has claimed during testimony that two senior Trafigura traders proposed the fraudulent scheme, allegations the traders categorically deny and which Trafigura's lawyers have called "logically and commercially absurd," according to Financial Times reporting. The whereabouts of the $600 million remain unclear, though court documents indicate some funds may have been channeled to Gupta's wife, whose bank accounts were frozen in 2023.

Sources

This report draws on court documents and testimony from the ongoing High Court proceedings in London, internal Trafigura emails submitted as evidence, and independent news reporting including coverage by the Financial Times. The trial is scheduled to resume on December 10 for closing arguments.