Trafigura Staff Raised Nickel Concerns Years Before Fraud Claim

Corporate records and court filings reveal that Trafigura Group’s trade finance desk raised concerns as early as 2020 about nickel-financing deals with firms linked to Indian businessman Prateek Gupta, years before the trading house lost approximately $600 million in an alleged fraud. The warnings, detailed in emails submitted to a London court, highlight that senior executives were aware of risks tied to the transactions more than two years before their collapse.

Background and Context

Trafigura, one of the world’s largest metals traders, stunned financial markets in early 2023 when it disclosed that over half a billion dollars of metal it had purchased was allegedly worthless—containers supposedly filled with nickel instead contained stainless steel, aluminum, and iron briquettes. The trading house’s lawyers have described the scheme as “a sort of Ponzi scheme,” with Trafigura as the sole victim. The deals in question involved Gupta’s firms selling Trafigura cargoes onboard vessels before later buying them back at a premium—a practice Trafigura called “transit financing” and Gupta’s lawyers termed “circular buy-back trades.”

Key Figures and Entities

Thibaut Barthelme, a member of Trafigura’s trade finance desk, flagged concerns in a September 2020 email to his superiors, Stephan Jansma and Camille Treujou. Barthelme warned that Trafigura had effectively become “the bank of this company” and that halting the financing would leave Gupta’s businesses without alternatives. Jansma has since been promoted to Trafigura’s chief financial officer. Prateek Gupta, the Indian businessman at the center of the deals, denies the allegations against him. Trafigura’s former nickel head, Socrates Economou, who oversaw the trades, was questioned in court proceedings last week.

Legal and Financial Mechanisms

The transactions were structured to provide Trafigura with a fixed fee, equivalent to an interest rate of 4% to 6%, effectively functioning as a loan. The trading house relied on financing from Citigroup Inc. for the deals. Court documents show that by 2021, the business with Gupta had grown to nearly 70,000 tons, or $1.2 billion worth of annual trading. However, Barthelme’s 2020 email noted irregularities, including “long voyage times, high interest costs, irregular sales,” and that both Credit Suisse and Deutsche Bank AG were unwilling to process payments to Gupta’s companies. Despite these warnings, Trafigura proceeded, believing the trades were secured by physical nickel cargoes.

International Implications and Policy Response

The case underscores vulnerabilities in global trade finance systems, where complex offshore structures can obscure risks. The unraveling began just before Christmas 2022, when Trafigura investigators in Rotterdam discovered that containers meant to hold nickel were filled with lower-value materials. The fallout has prompted scrutiny of due diligence practices in commodities trading, with regulators and industry watchdogs calling for greater transparency in financing arrangements. Gupta’s lawyers have argued that Trafigura executives were aware the cargoes did not contain LME-grade nickel, a claim the trading house denies.

Sources

This report draws on court filings submitted in London, corporate records, and statements from Trafigura Group. Additional context is provided by Reuters reporting and internal emails disclosed during legal proceedings.