CRIMINAL CAPITALI$M

Another metals trader says it has been hit by nickel fraud

Bloomberg News | August 24, 2023 

Cranes at the port Klang near Kuala Lumpur. Stock Image.

Another trading house has been stung after buying a cargo supposedly containing nickel that turned out to be full of near-worthless rubble.


The latest example, detailed in lawsuits in London and Singapore, is separate from the $600 million alleged fraud against Trafigura Group that shocked the trading industry earlier this year, but it involves several of the same companies.

The revelation that the problem of non-existent nickel is more widespread will be another blow to confidence in the scandal-prone metals trading industry. The Trafigura case has spawned several lawsuits, while in March the London Metal Exchange discovered that 54 tons of “nickel” held at a warehouse in Rotterdam and owned by JPMorgan Chase & Co. was actually just bags of stones.

It also casts more light on the business links between several different companies that Trafigura alleges were connected to businessman Prateek Gupta and perpetrated a massive fraud against it.

In the new case, US trading house Kataman Metals LLC alleges it paid $3.3 million for nickel from New Alloys Trading Pte. only to discover when it opened the containers that there was no nickel inside.

New Alloys is among the companies that Trafigura claims was part of the alleged Gupta fraud. New Alloys isn’t owned by Gupta, and the Kataman claim against New Alloys makes no mention of him.

Still, the trade appears to be part of a broader set of transactions involving several companies linked to Gupta, and Gupta himself got involved in negotiations over them, according to Kataman’s separate London lawsuit.

Moreover, many of the details of what is alleged to have happened in the Kataman and Trafigura cases are similar, and the two companies’ trades appear to have unraveled at almost exactly the same time.

Nickel deals go bad

Missouri-headquartered Kataman is a mid-sized US-focused commodity trading house best known for its role in the aluminum market. But in August 2022, according to Kataman’s filings in a Singapore lawsuit, it entered into an agreement to buy 167 tons of LME-branded nickel for $3.3 million from New Alloys.

The nickel was supposed to travel on a simple route — from Singapore to the Dubai port of Jebel Ali that month. Instead, unbeknown to Kataman, the containers ended up sitting on a dock in Port Klang, Malaysia until the following March.

In the meantime communication between the parties deteriorated. The bills of lading — crucial shipping documents that ascribe ownership of a particular cargo — were lost in transit to Kataman from its bank, JPMorgan Chase & Co.

When Kataman tried to have the documents re-issued, representatives of New Alloys and its freight forwarding agent Techies Logistics Pte. delayed that process, the legal filings allege. By mid-January New Alloys and Techies had stopped responding to emails and WhatsApp messages altogether, according to Kataman’s lawsuit.

In March, having finally located the containers — still in Port Klang — Kataman representatives, accompanied by inspections experts and lawyers broke them open, only to find they did not contain any nickel.

“Each of the 7 shipping containers contained 16 or 17 jumbo bags containing waste steel briquettes which were virtually worthless,” the claim at Singapore’s Supreme Court states. A laboratory analysis of the material did not find any nickel present.

Kataman’s lawyers claim that New Alloys and Techies “by unlawful means conspired and combined together to defraud the Claimant and to conceal such fraud and the proceeds of such fraud from the Claimant.”

Kataman and Techies did not respond to requests for comment made by email and phone. Techies filed a response in the Singapore case, saying that its role had been limited to organizing storage and shipping for New Alloys, and that it had never vouched for the cargo’s contents. Manoj Menon, the director of New Alloys, has previously denied all allegations of fraud in response to the Trafigura case.

A representative from New Alloys said it had not been served legal documents so would reserve its comments regarding the nickel cargo. It did say that the company had “only a general business relationship” with Prateek Gupta and that it had been doing business with Kataman Metals since November 2020.

Kataman’s account shares some similarities with Trafigura’s case. Trafigura also found “non-compliant materials ranging from steel products to iron products,” in containers that should have held nickel, the trading house has said in its legal filings.

Techies was also involved as a shipping agent in a cargo of nickel that’s at the center of a legal dispute connected to the Trafigura case.

Gupta link

The nickel trade appears to be part of a broader set of trades between Kataman and several companies, at least one of them directly connected to Gupta.

In a separate London lawsuit, Kataman explains that it struck deals with TMT Metals (UK) Ltd. and Mine Craft Ltd. whereby they would pay a hefty rate of interest to Kataman for it to buy and then re-sell cargoes of nickel and tin.

TMT would nominate a supplier for the nickel and tin, which Kataman would then buy, and later re-sell it to TMT or Mine Craft plus interest paid monthly at a rate of 8.5% over Libor.

Both TMT and Mine Craft are named as defendants in Trafigura’s case against Gupta; Trafigura alleges that both are controlled by Gupta, who denies he controls Mine Craft.

The nominated suppliers are not named in Kataman’s London lawsuit, and the filings do not make any reference to the Singapore lawsuit. But it appears that New Alloys was nominated by TMT as the supplier of the nickel — and so that the nickel that is the subject of the Singapore lawsuit is the same metal that was supposed to be sold on to TMT. The dates and the amount of the payment referenced in the two lawsuits are the same.

While TMT initially made some interest payments in November 2022, according to Kataman’s London lawsuit, it failed to make further payments. Kataman executive vice president David Kramer corresponded with Gupta personally on the matter in November and December, according to Kataman’s suit, to little avail.

That was the same time as Trafigura’s relationship with Gupta was coming unstuck. After growing increasingly concerned in October and November 2022, Trafigura finally carried out an inspection of cargoes in Rotterdam in December 2022 — only to discover they contained no nickel.

Gupta has claimed that Trafigura was aware he was selling it materials other than nickel. A person close to him said that TMT has challenged the Kataman case and is arguing that the UK is not the proper jurisdiction for it.

(By Archie Hunter, Alfred Cang and Jonathan Browning, with assistance from Jack Farchy)