Another Metal Trader Falls Victim to Nickel Fraud Allegedly Related To Trafigura Incident

Another trading company has fallen victim to a significant setback, purchasing what it believed to be a shipment of valuable nickel, only to find the cargo filled with nearly worthless debris.

This recent incident, outlined in legal actions filed in both London and Singapore, stands apart from the earlier $600 million alleged fraud against Trafigura Group that jolted the trading sector earlier this year. Nevertheless, it involves several of the same firms.

The emergence of widespread issues involving fictitious nickel deals is poised to undermine confidence in the metals trading industry, which has already been marred by various scandals. The Trafigura case has led to multiple legal suits, and in March, the London Metal Exchange revealed that 54 tons of so-called “nickel,” held in a Rotterdam warehouse owned by JPMorgan Chase & Co., was, in fact, nothing more than bags of stones.

Additionally, this situation brings greater attention to the business relationships among various companies that Trafigura alleges were associated with businessman Prateek Gupta and implicated in a massive fraudulent scheme against Trafigura.

In this new case, Kataman Metals LLC, a trading firm based in the US, claims to have paid $3.3 million to New Alloys Trading Pte. for a quantity of nickel. Upon opening the containers, however, Kataman found them devoid of any nickel.

New Alloys is one of the companies implicated in Trafigura’s accusations of Gupta-related fraud. While New Alloys is not owned by Gupta, Kataman’s claim against the company does not mention him.

Nevertheless, it appears that this trade is part of a larger series of transactions involving multiple companies connected to Gupta. Gupta himself was reportedly involved in the negotiations surrounding these trades, as per Kataman’s separate lawsuit filed in London.

Moreover, the details surrounding the Kataman and Trafigura cases bear striking similarities, with both companies’ transactions unraveling almost concurrently.

Nickel in pickle

Kataman, headquartered in Missouri, is a mid-sized commodity trading firm primarily focused on the US aluminum market. In August 2022, Kataman entered into an agreement, as indicated in its filings for a Singapore lawsuit, to purchase 167 tons of LME-branded nickel for $3.3 million from New Alloys.

The planned route for the nickel was straightforward: from Singapore to the Dubai port of Jebel Ali that same month. However, unbeknownst to Kataman, the containers remained on a dock in Port Klang, Malaysia, until the following March.

During this time, communication between the parties deteriorated. The bills of lading, crucial shipping documents confirming ownership of specific cargo, went missing while being transmitted from Kataman’s bank, JPMorgan Chase & Co.

When Kataman attempted to have the documents re-issued, representatives from New Alloys and their freight forwarding agent, Techies Logistics Pte., allegedly delayed the process. By mid-January, communication from New Alloys and Techies ceased entirely, according to Kataman’s lawsuit.

Finally, in March, Kataman, accompanied by inspection experts and lawyers, opened the containers in Port Klang and found no trace of nickel. Instead, the claim lodged with Singapore’s Supreme Court reveals that each of the seven containers contained bags of waste steel briquettes, nearly worthless in value. Laboratory analysis confirmed the absence of nickel.

Kataman’s legal team alleges that New Alloys and Techies collaborated unlawfully to defraud Kataman and hide the evidence of this deception.

Requests for comment from both Kataman and Techies went unanswered. Techies did respond in the Singapore case, clarifying that its role was limited to organizing storage and shipping, and it had not vouched for the cargo’s contents. Manoj Menon, the director of New Alloys, had previously denied all fraud allegations connected to the Trafigura case.

The Gupta link

New Alloys stated that it had not received legal documents and would withhold comments regarding the nickel cargo. The company did acknowledge a “general business relationship” with Prateek Gupta and confirmed its business interactions with Kataman Metals since November 2020.

The parallels between Kataman’s experience and Trafigura’s case are evident. Trafigura also found “non-compliant materials ranging from steel products to iron products” in containers meant to contain nickel, according to legal documents.

Techies, too, was implicated as a shipping agent in a nickel cargo at the center of a legal dispute tied to the Trafigura case.

The nickel trade seems to be part of a broader pattern of exchanges involving Kataman and multiple companies, with at least one directly linked to Gupta.

In a separate lawsuit filed in London, Kataman outlines agreements with TMT Metals (UK) Ltd. and Mine Craft Ltd. These agreements involved Kataman purchasing and subsequently reselling nickel and tin cargoes for a substantial interest fee.

TMT would nominate suppliers for nickel and tin, which Kataman would buy and then sell back to TMT or Mine Craft at a monthly interest rate of 8.5% over Libor.

Both TMT and Mine Craft are named in Trafigura’s case against Gupta. Trafigura claims both entities are controlled by Gupta, an allegation he denies in regard to Mine Craft.

The designated suppliers are unnamed in Kataman’s London lawsuit, which makes no reference to the Singapore lawsuit. Nonetheless, it appears that New Alloys was nominated by TMT as the nickel supplier. Therefore, the nickel subject to the Singapore lawsuit aligns with the metal intended for resale to TMT. The dates and payment amounts cited in both lawsuits are consistent.

Although TMT initially made interest payments in November 2022, it subsequently failed to do so, according to Kataman’s London lawsuit. In November and December, Kataman’s Executive Vice President, David Kramer, corresponded with Gupta regarding this matter, with limited success.

This period coincided with the deterioration of Trafigura’s relationship with Gupta. After growing increasingly suspicious in October and November 2022, Trafigura conducted an inspection in December 2022, revealing that the cargoes in Rotterdam contained no nickel.

Gupta contends that Trafigura was aware he was supplying materials other than nickel. An individual close to him mentioned that TMT is challenging the Kataman case, arguing that the UK lacks jurisdiction in this matter.

Nickel futures have dropped beneath the $20,000 per tonne mark, maintaining proximity to a one-year low due to concerns about a potential decrease in demand caused by the uncertain global economic situation and China’s disappointing economic data. Despite China, a major importer, implementing strategies to bolster its economy, the real estate industry suffered a blow as Country Garden halted trading on 11 domestic bonds and defaulted on payments for two-dollar bond coupons.

Information for this briefing was found via Mining.com and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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