Trafigura Group has spent the last two months trying to uncover this systematic fraud. Trafigure is suing Prateek Gupta and several companies, including UD Trading Group and TMT Metals, according to a statement.
The missing nickel hits hard at a company that has become one of the biggest trading houses in the last decade. The incident is another bad news story for the metals industry. In the past, we’ve had fake warehouse receipts, containers filled with painted rocks, and duplicate shipping documents, Bloomberg writes.
The undelivered nickel fraud cost Trafigura Group $577 million, but the final bill could be lower if the company recoups some of the lost funds. The head of the nickel and cobalt trading group, Socrates Economou, is leaving the company, according to people familiar with the situation.
However, Trafigura states that they do not believe anyone from the company participated in the fraud.
High nickel prices complicate many things
Nickel prices recorded a growth of 230 percent. The increase in the value of this metal was influenced by several factors, the last of which was the decision by one of the largest stainless steel producers in the world, Tsingshan Holding, to withdraw short-position traders from the London Metal Exchange (LME).
The conflict between Russia and Ukraine is another key factor in this growth, considering that Russia is the fourth largest producer of nickel in the world, contributing about 10 percent to world supply. Russia is also a major producer of gold and palladium, metals that have also seen volatility in value in recent weeks, writes Capital.com.
The London Metal Exchange took the unusual step of halting nickel trading indefinitely due to the uncontrolled price rise. Investors are concerned that this could lead to even higher nickel prices shortly, especially in global markets, given that consumers cannot access their supplies.
