Indian business tycoon Prateek Gupta offered to pay Trafigura $15mn using financing from a Mauritian bank under scrutiny for its ties to the accused fraudster, according to court documents obtained by the Financial Times.
Trafigura, the world’s largest private metals trader, this month secured a $625mn freezing order against Gupta and his business empire in one of London’s biggest ever commodities lawsuits.
The trading house has accused the Dubai-based businessman of perpetrating a “systematic fraud” against it involving fake nickel cargoes, forcing it to take a $577mn writedown.
Gupta’s metals trading empire spans Europe, the Middle East and Asia, while Trafigura also claims that he appears to have interests in a range of other businesses including energy and engineering companies.
The fallout of the case has also spread to Mauritius, where banking regulators are examining Silver Bank, one of the country’s small lenders that has links to Gupta.
Silver Bank has denied the metals trader is one of its shareholders and this week told the FT it “has no direct or indirect exposure to Mr Gupta or linked companies and individuals”.
However, the lender is likely to come under more scrutiny over its links with the businessman.
In an affidavit filed to London’s High Court this month, Trafigura’s former head nickel trader Sokratis Oikonomou detailed how Gupta offered up financing from Silver Bank as part of several proposals aimed at “repairing the rapidly deteriorating trading relationship”.
The relationship started to deteriorate when Trafigura first discovered in November that some nickel containers it had purchased contained far less valuable metal instead.
Trafigura, one of the world’s main conduits for metals trading, has so far inspected about 156 out of 1,104 containers related to the alleged fraud. None of them contains material compliant with the contracts, it said.
Oikonomou stated Gupta “offered to provide two letters of credit totalling $15mn from Silver Bank” on January 11, before later that month revising it down to $7mn.
Oikonomou added that the pair “subsequently discussed some draft wording for the purposes of the letters of credit”.
Letters of credit are one of the key financing tools that underpin global trade, providing sellers of goods with an assurance that a financial institution will cover any shortfall if a buyer fails to pay.
The affidavit also reveals that Gupta claimed to have offered further letters of credit to the trading arm of Indonesia mining company Mind ID.
The miner had become ensnared in the fiasco when it purchased cargoes purporting to contain nickel from Trafigura that had originated from the metal trader’s companies.
“We have verbally offered them Silver Bank lc [letters of credit] solution,” Gupta told Oikonomou in a January WhatsApp message quoted in the affidavit.
In a separate affidavit, a lawyer acting for Trafigura argued that this series of offers “suggests that Mr Gupta considers that Silver Bank will act at his direction”.
Silver Bank, Gupta and Mind ID did not respond to requests for comment.
A representative for Gupta said on Friday that he is preparing a “robust response” to Trafigura’s allegations and plans to “file an application to remove the freezing order on or before April 6”.
Silver Bank’s sole shareholder is the Cayman Island investment firm Silver Star SPC, which acquired the lender out of conservatorship in October 2021 and injected $40mn of capital to bolster its balance sheet.
Trafigura’s lawyer also argues in his affidavit that “Mr Gupta may have some interest in Silver Star and/or exercise control over it” because the metals trader also offered up security over a number of its assets.
Gupta offered Trafigura security over Singaporean renewable energy company Ultravolt Power, whose sole shareholder is Silver Star, according to Oikonomou’s affidavit.
Other assets were also proposed as part of a wide ranging security package, including a “project value chain solutions company called Hangji Global Limited”.
Corporate filings in Cyprus, where Hangji’s thinly traded shares are listed, show that Gupta incorporated the company in 2015 before its shares were transferred to several offshore vehicles.
Silver Star, Ultravolt and Hangji did not respond to requests for comment.