LONDON (Reuters) – Broker ED&F Man and Singapore commodities trader Straits wrapped up a metals fraud trial on Friday, blaming each other after warehouse receipts for nickel stored in Singapore worth $284 million were discovered to be fraudulent.
The practice of using metal as collateral in warehouse financial deals came under increasing scrutiny after a $3 billion fraud in 2014 at Qingdao port in China.
ED&F Man Capital Markets (MCM) and Straits agree that warehouse ownership documents provided to MCM in 2016 were forged, but they dispute who was responsible.
MCM is a unit of private commodities merchant ED&F Man, which brought civil cases in London against 10 defendants to recoup the $284 million it paid for the warehouse receipts.
MCM accused Straits (Singapore) PTE Ltd of providing scanned warehouse receipts to two Hong Kong based companies which MCM said later sent fraudulent documents based on them to MCM.
Straits Singapore is a unit of Straits Financial, itself owned by logistics group CWT International Ltd.
“It’s not only a question of lying, but entering into a highly suspicious series of transactions, we say, which have been camouflaged by use of sham contractual documents,” MCM barrister Huw Davies told the court.
Straits knew that fraudulent activity was occurring or at least turned a blind eye, MCM alleges.
Straits said that providing scanned warehouse receipts is common industry practice to show potential buyers what is on offer.
“We say Straits were being actively misled,” said Straits barrister David Lewis. “It will be unprecedented to find that a party was in on the conspiracy when it was being misled by the inner circle of conspirators.”
MCM failed to undertake due diligence and verify the documents before making payment, Straits said.
When MCM originally filed the case in 2017, it sued two Hong Kong firms, Come Harvest Holdings Ltd and Mega Wealth International Trading Ltd, which provided 92 warehouse receipts to MCM.
MCM later added Straits and seven other defendants to the lawsuit, which along with the two Hong Kong firms, all deny responsibility for fraudulent activity.
Only MCM and Straits participated in the London trial.
Reporting by Eric Onstad; Editing by Kirsten Donovan
(c) Thompson Reuters