Lawyers for Trafigura have alleged that when it sought to inspect nickel cargoes later found to contain worthless material, Prateek Gupta’s head of trading urged them to use a “friendly” agency that had been de-listed years earlier.
Gupta was sued by Trafigura in 2023 for his alleged role in the nickel trading scheme, which has left the trader facing more than US$600mn in losses. The Indian businessman has argued the arrangement was actually devised and overseen by traders on Trafigura’s nickel desk.
Trafigura’s court submissions have alleged that in the second half of 2022, Gupta’s companies increasingly failed to repurchase or pay for several cargoes, resulting in a build-up of containers at ports and concerns from its financing provider Citi.
Giving evidence to a London court today, Gupta was asked about the increasing pressure from Trafigura to inspect the cargoes in October that year.
Lawyer Nathan Pillow, representing Trafigura, said to Gupta that if inspections had been undertaken by an “honest third party”, the fraud would be discovered and “the game would be up”.
Gupta replied: “Potentially.”
The court was shown an email from Girdhar Rathi, then-head of trading at Gupta-run UIL Singapore, sent to Trafigura on October 27, 2022. The email said Rathi had identified cargoes for inspection that were set to be moved to a warehouse.
Rathi asked a colleague to share details of the warehouse and inspection agency to be used, but Dayansh Jain from Trafigura’s operations team replied: “For the inspection, we shall appoint our inspection agency.”
Another UIL employee responded nominating Trans Border Safety Control Services LLC as the proposed inspection agency. This was rejected by Jain, who said Trafigura “will have to follow our procedure for inspection and appoint our agency only”.
Trans Border had in fact been de-listed as a registered inspection provider by Indian authorities in 2016, after allegedly misdeclaring the contents of material it had reviewed, the court was told.
Asked whether Rathi was trying to involve a “disreputable” and de-listed inspection agency, Gupta replied: “I can’t confirm that.”
Pillow asked Gupta about an affidavit he submitted in 2023, where he alleged that because both UIL and Trafigura knew the cargoes did not contain nickel, they proposed that “a friendly inspection agency appointed by Trafigura would carry out inspections of 20% of the cargoes”.
Gupta said: “I stand by my statement”, adding that this was “an operational discussion”. He has repeatedly told the court he was not aware of day-to-day operational matters relating to the Trafigura trades.
But the inspection was ultimately carried out by Trafigura’s approved agency on November 9, 2022, resulting in the discovery of carbon steel rather than LME-grade nickel.
Missing funds
Pillow also asked Gupta what had happened to the funds received from Trafigura.
The lawyer said that by 2022, Gupta had sold large volumes to Trafigura that had not been repurchased, which Pillow said would have generated at least US$400mn in revenue.
“Where was this money you were taking from Trafigura going in your business?” Pillow asked.
“I don’t know the breakdown,” Gupta replied.
Pillow said some of the defendants in the case – which Trafigura alleged are linked to Gupta – were facing financial difficulties from March 2021 onwards. He alleged that Gupta “needed the cash to pay off other creditors in your business empire”.
“You were effectively robbing Peter to pay Paul,” Pillow said.
Gupta said he did not agree and did not handle day-to-day operations.
Pillow asked whether Gupta siphoned the money off into his own companies and “secrete[d] it safely away”, whether he gave it to his wife, or whether he gave it to people running other companies. Gupta denied each suggestion.
“So you just lost hundreds of millions of dollars and you can’t remember where it went?” Pillow asked.
“I don’t have an answer to that,” Gupta said.
The trial continues.
