Trafigura star trader plotted fake nickel scheme, Prateek Gupta tells court
Indian tycoon defending $600mn lawsuit brought by commodities house in London
Indian business tycoon Prateek Gupta has told a court that Trafigura’s former star nickel trader orchestrated a scheme that involved the shipment of huge volumes of fake nickel cargoes.
Gupta, testifying in a London court on Wednesday via video link from Dubai, claimed that Socrates Economou had in 2019 proposed an arrangement that involved the transportation of purported nickel shipments that would in fact contain various low-value materials such as iron briquettes.
It was Gupta’s first day of testimony as defendant to a $600mn lawsuit brought by Trafigura, which alleges that it had been the victim of a “systemic fraud” perpetrated by Gupta and companies he controlled. The five-week trial in London’s High Court began earlier this month.
Lawyers for Dubai-based Gupta argue that the trading house was in on the scheme, which they allege was profitable for Trafigura because it earned interest for financing the cargoes while they were being transported.
Economou, Trafigura’s former head of nickel trading, has denied having had any knowledge of the fraud at the time. “I am insulted by the suggestion that I would sacrifice my integrity and jeopardise my career to devise and propose such a plan,” he said in a witness statement.
Asked on Wednesday by Trafigura’s lawyer, Nathan Pillow KC, whether he accepted that the proposed arrangement would amount to fraud, Gupta said: “That’s what was proposed by them . . . I was just following instructions.”
When pushed about whether he understood in 2019 that such a proposal would amount to a “fraudulent or deceptive arrangement”, Gupta said “no”.
Gupta said he had not been aware of the “operational modalities” of how the proposed scheme would work.
He claimed instead that Economou and former Trafigura employee Harshdeep Bhatia would discuss how to structure the arrangement with colleagues. Gupta said Bhatia later told him the scheme had been approved, noting that “at that stage he [Bhatia] was reporting to the CEO”, who at the time was Jeremy Weir.
Even so, Gupta told the court, the two former Trafigura employees had given him “instructions” to keep the arrangement quiet and “only to discuss this with specific people”.
Asked by Pillow whether he had believed at the time that Trafigura was “going to deceive the [London Metal Exchange]” by falsely presenting cargoes as pure nickel, Gupta said “potentially, yes.”
That would mean being aware of “fraud” said Pillow, to which Gupta replied: “Not by me.”
During testimony in the high-profile case this month, Trafigura claimed it made just $10mn from selling the contents of the so-called nickel cargoes that it bought for $500mn from Gupta.
The court heard on Monday that concerns about the commercial arrangement had been raised internally by Trafigura’s trade finance team before the fraud was discovered.
The concerns raised included that journey times for the purported nickel shipments appeared to be unusually lengthy, while Gupta’s company was paying Trafigura a relatively high interest rate for financing the cargoes, the court heard.
“Main concern is we have become the bank of this company,” given the large sums being extended to Gupta’s company by Trafigura for the shipments, wrote Thibaut Barthelme, a member of the trade finance desk, in an email in 2020.
The trial continues.