LONDON – Staff at Trafigura Group worked with alleged fraudster Prateek Gupta to ensure that their dealings would not raise the suspicion of key lender Citigroup, according to messages made public in the court battle between the two sides.

The revelation is the latest twist in a case that has shocked the commodity trading world, after Trafigura in February accused the Indian businessman of perpetrating a massive fraud against it.

The company said that it had paid Mr Gupta’s firms more than US$500 million (S$670 million) for nickel, only to discover that the cargoes actually contained worthless rubble.

On one occasion in January 2022, a Trafigura employee instructed one of Mr Gupta’s executives to “please maintain a minimum of credibility” regarding the journey times for cargoes of nickel the two companies were trading with each other.

“Luckily Citi accepted this one, with little suspicion, but we might not get as lucky in the future,” he wrote.

In another message in June 2021, a different Trafigura trader congratulated Mr Gupta on a “great year” and said the “team” had been doing “good response work to avoid any red flags”.

Mr Gupta claims the messages, which were made public in a court hearing on Dec 5, show that Trafigura was aware that the cargoes of “nickel” it was buying from him in fact contained other goods. He is seeking to have a worldwide freezing order against him lifted.

Lawyers for Trafigura said in response that Mr Gupta’s defence was “flawed and frankly desperate”, arguing that it would have made no sense for Trafigura to pay hundreds of millions of dollars for material it knew was worthless.

They said the messages disclosed by Mr Gupta do not contain any statement “clearly indicating complicity in the fraud on the part of any Trafigura employee”, and disputed the interpretation and context of the messages suggested by Gupta.

“Mr Gupta’s claims appear to be nothing more than mudslinging to deflect attention from the fraud he admits to committing against Trafigura,” a spokesperson for the company said.

Nonetheless, the numerous WhatsApp and e-mail exchanges produced by Mr Gupta raise uncomfortable questions for Trafigura, showing staff at the commodity trading giant sought to arrange potentially suspicious trading activity in a way that would avoid any further scrutiny from Citi.

The US bank, which continues to finance Trafigura, was a key player in the saga, extending a credit line of US$850 million that the company used to finance its trades with Mr Gupta.

Citi pulled the plug on the arrangement in October 2022, triggering the series of events that ended with Trafigura suing Mr Gupta.

Although Trafigura had traded with Mr Gupta for years, their relationship expanded dramatically starting in around 2019.

Under an arrangement that Trafigura describes as “transit financing”, the trading house would buy cargoes of nickel from companies connected to Mr Gupta as they were loaded on to a vessel, with the understanding that once they reached their destination 90-180 days later, another Gupta-linked company would buy the cargo back for the same price. Trafigura would pocket a fee equivalent to an interest rate of about 4 per cent to 6 per cent.

In the e-mail dated Jan. 26, 2022, Mr Dayansh Jain, an operations analyst at Trafigura in Mumbai, wrote to Mr Gupta’s head of trading Girdhar Rathi to point out that one of Trafigura’s trades with Mr Gupta was showing a transit time of 95 days to travel the short distance from Taiwan to China.

“Banks do not find it logical to accept a Taiwan to China BL (bill of lading) with 95 days transit (instead of a few days),” he wrote. “Luckily Citi accepted this one, with little suspicion, but we might not get as lucky in the future.”

Trafigura has acknowledged that the shipments involved in its dealings with Mr Gupta took an unusually long time, with former head of nickel Socrates Economou saying in an earlier affidavit that such an arrangement allowed Mr Gupta’s companies to secure financing for the longest period possible.

Trafigura has said it does not believe that any of its employees were complicit in the alleged nickel fraud, though the company has acknowledged shortcomings in its processes and has pledged to learn from the experience.

Red flags

In an affidavit, Mr Gupta claimed that any cargo held by Trafigura for more than 180 days would raise a red flag with Citi, and as a result that Trafigura would juggle its trades with him to ensure that he could repurchase each cargo within that timeframe.

“Team has been doing good response work to avoid any red flags,” Mr Harshdeep Bhatia, a Trafigura trader in Mumbai who was Mr Gupta’s main point of contact and left the company earlier in 2022, wrote in a WhatsApp message on June 6, 2021.

Mr Gupta also claims that it was Trafigura that asked to bring several new companies into their dealings, in order to disguise the trading house’s true exposure to his group.

“We need to split co… trade finance raising questions,” Mr Bhatia wrote on Sept. 2, 2020. As a result, according to Mr Gupta, several new entities were introduced to the arrangement, which involved Trafigura buying cargoes from one Gupta-linked company and then later selling them back to a different Gupta-linked company.

In a separate court document, Mr Bhatia said that the “red flags” message was written in the context of Mr Gupta’s operational delays and the impact of the Covid-19 pandemic, and asserted that it was in fact Mr Gupta who brought the additional companies into the trade. BLOOMBERG