ED&F Man has filed a $284 million case for fraud against two Hong Kong based companies
(Kitco News) - International Broker ED&F Man has filed a $284 million lawsuit against two Hong Kong corporations, alleging that they knowingly provided fraudulent warehouse receipts for nickel stored in Asia, court documents show.
It has been reported that Come Harvest Holdings Ltd (CHH) and Mega Wealth International Trading Ltd, have denied the charges. The trial at London’s High Court that also relates to fraudulent warehouse receipts for nickel is now in its first week.
The case also involves French bank Natixis who is suing commodities broker Marex Spectron for $32 million. CHH is a defendant in both the Natixis/Marex suit and the ED&F Man case.
Judge Simon Bryan said he had received an email from lawyers acting for CHH and Mega Wealth expressing concern that proceedings in the Natixis/Marex case would have an impact on their clients in the ED&F Man case since much of the background was the same.
The warehouse receipts were part of a repo (repurchase) agreement, brokered by ED&F Man between Australia and New Zealand Banking Group (ANZ) and the two Hong Kong firms.
Reuters said, ANZ is not a party to ED&F Man’s lawsuit in UK courts, but in June 2017, it filed papers asking the U.S. District Court in San Francisco to allow it to interview U.S. witnesses about the alleged warehouse receipt fraud. ANZ declined to comment.
ED&F Man paid $117.3 million to CHH and $167.2 million to Mega Wealth for nickel stored in Asian warehouses, but the warehouse receipts the two firms provided were forgeries, lawyers for ED&F Man said in court documents.
The ED&F Man documents alleged the two Hong Kong firms knew or had sufficient reason to suspect the receipts were forged. The two Hong Kong companies said they had no knowledge that the receipts were fake, a defense filing showed.
The practice of using metal as collateral in warehouse repo deals has come under increasing scrutiny since a $3 billion fraud four years ago at Qingdao port in China, which led to a $440 million fine for the firm involved, Dezheng Resources, and a 23-year jail sentence for its chairman.