Asked for comment, Gupta's lawyers said: "The matter is before the courts and is therefore sub judice. Our client will respond accordingly in court." Court documents show the High Court last week approved a worldwide freezing order of $625 million against Gupta and his companies. The order is an injunction granted by the English courts to restrain individuals or businesses from disposing of or dealing with assets on a worldwide basis. A further hearing on the freezing order is scheduled for Feb. 24.
Trafigura said in the documents its claim arises from a "large-scale and systematic metal financing fraud against Trafigura, exposing it to losses in excess of $500 million". It is also seeking compensation following trades when it has sold the cargo to independent third parties. The following gives background and details from the court papers filed by Trafigura's lawyers. HOW DID THE TRADES WORK? Known as transit finance, the deals in question involved Trafigura buying nickel from companies connected to and controlled by Gupta and selling it back to those companies at a future date for a higher price. This would earn Trafigura a return equivalent to the interest on the value of that nickel over the period during the time the commodity trader owned the metal. Trafigura had the option of selling it on the open market. WHAT WAS REALLY IN THE CARGOES? The court documents submitted by Trafigura say it became aware of issues beginning in October 2022. On Dec. 22 2022, Trafigura inspected eight containers shipped by a company connected to Gupta, which contained neither nickel nor nickel alloy. "Between 25 and 31 January 2023, Trafigura managed to open and visually inspect a further 117 containers in Rotterdam, Jebel Ali, and Kaohsiung. None of those containers appeared to contained nickel in any form," the court papers said. Instead, they allegedly contained carbon steel, a much less valuable commodity than nickel , which ended 2022 up 44% from the previous year and in March reached a record above $100,000 a tonne. In total Trafigura has inspected 156 out of 1,104 containers, it said. WHAT CAN AND DID GUPTA SAY? On Nov. 15 Gupta told Trafigura that the cargoes that it still owned consisted of around 20,000 tonnes of nickel alloy and around 5,000 tonnes of "other materials," the court papers said.
The papers raise the possibility Gupta's lawyers will say Trafigura failed to request analysis of the cargoes before payment and the 'HS codes' were absent from documentation. Harmonised System (HS) codes are a standarised way of classifying globally traded products and used by customs authorities. Certificates of analysis verify content. Trafigura said it would strongly dispute this argument. WHERE DOES TRAFIGURA WANT THE CLAIM HEARD? Trafigura is asking for the claims against Gupta and connected companies to be heard in an English court. "It is the only way of avoiding parallel proceedings in multiple jurisdictions, and an inevitable waste of very substantial amounts of time and cost," the court papers said. "Trafigura will commence such foreign proceedings only to the extent that it is necessary for it to do so in order to obtain interim relief in support of these proceedings." (Reporting by Pratima Desai, Eric Onstad and Polina Devitt; Editing by David Holmes and Barbara Lewis)
