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Australian bank ANZ has been awarded more than US$293.6mn in damages against two Hong Kong metal traders that supplied it with forged warehouse receipts for nickel in order to obtain financing.

The judgement from Hong Kong’s High Court following a trial last January is the latest instalment in a long-running case that has also embroiled commodity trader ED&F Man and Singapore financial services group Straits Financial.

The fraud involved the creation in 2016 of 83 fake receipts for nickel held at London Metals Exchange warehouses in Malaysia, Singapore and South Korea, which were used to obtain financing from ANZ and ED&F Man Capital Markets (MCM), the trader’s financial services arm.

The discovery of the fraud in early 2017 triggered a years-long international investigation by ANZ to track down the funds, and litigation by the swindled financiers in Asia, Europe and the US. Last year an English court awarded MCM US$282mn in damages against Straits over the same scandal.

In a judgement published on January 20, Hong Kong judge Mimmie Chan found that Hong Kong companies Come Harvest Holdings, Mega Wealth International Trading and Come Harvest director Wong Wai Kwok – who was found by the court to have control over both companies – are liable for damages for making fraudulent representations to ANZ using the fake documents.

All three defendants, along with three employees of their agent Genesis Resources who were not defendants in the litigation, also engaged in a conspiracy with the common intention of defrauding the lender, Justice Chan found.

Three other companies – Excellence Raise Overseas Limited, Jolly Admire Limited and High Express Holdings Limited – were ordered to pay some US$14.6mn to ANZ after the judge found they received funds were derived from the fraud and were unjustly enriched.

But the judge dismissed ANZ’s claims that Hong Kong residents Ko Siu Mei Hamay and Siu Chung Hang, employees of Come Harvest and Mega Wealth respectively, were party to the deceit and conspiracy against the bank.

ANZ did not immediately respond to a request for comment sent outside business hours in Sydney.

Come Harvest, Mega Wealth and Wong could not be reached for comment. A lawyer who represented Excellence Raise, Jolly Admire and High Express did not immediately respond to a request for comment.

 

Receipts forged in Shanghai

Commencing in 2016, Come Harvest and Mega Wealth entered into a series of sale and repurchase, or ‘repo’, deals with MCM for stored nickel.

MCM then conducted simultaneous repo transactions with ANZ through the bank’s subsidiary ANZ Commodity Trading Pty Ltd.

Underpinning the arrangements were the supply by Come Harvest and Mega Wealth of what were purported to be original receipts for nickel stored at warehouses operated by Access World, a Glencore subsidiary.

It emerged in 2017 that the receipts were all bogus, with Access World ultimately informing ANZ that all but one of the 84 receipts it presented had already been cancelled.

Last year the High Court in London found that Straits had supplied Come Harvest and Mega Wealth with colour-scanned copies of the original receipts for the nickel, pursuant to its own dealings with the two companies. Straits had already pledged the receipts to its own financiers.

The court found Straits had knowledge of the fraud and was liable for MCM’s losses, along with Genesis and the two Hong Kong companies, but Straits was not a defendant in the litigation brought by ANZ. Straits lost an appeal against the London court’s decision late last year.

Like the judgement in the London litigation by ED&F Man, Justice Chan’s ruling said it was not necessary to find the individual who forged the receipts.

But evidence obtained by ANZ from DHL showed that the fake receipts were couriered to Come Harvest and Mega Wealth from a company in Shanghai, rather than Singapore, where Straits operated from.

“There is no logistical basis for the hard copy warehouse receipts to be dispatched from Shanghai, instead of Singapore, unless Shanghai is the place where the forged warehouse receipts were produced,” Justice Chan wrote.

She found it is “likely” that Wong, who was based in Shanghai, “either on his own or in conjunction with [Genesis employee] Jessie, had arranged for the forged warehouse receipts to be produced, and sent to [Come Harvest] and [Mega Wealth] in Hong Kong, for endorsement and delivery to MCM.”

“I am satisfied and find that Wong had knowledge of the modus operandi of the entire scheme devised and agreed amongst Genesis, at least certain individuals of Straits, and [Come Harvest and Mega Wealth]” to deceive ANZ and MCM through manufacturing the fake receipts, the judge found.

While Genesis was not a defendant in ANZ’s suit, the High Court in London last year found the company and an individual associated with it partly liable for the damages owed to MCM.

Although Wong and his companies stopped participating in the case before the trial, they earlier filed written defences in which they denied knowing that the receipts were fake.

They claimed that they simply forwarded the receipts they got from Straits to MCM, although the court found there were differences in the documents received from Straits and those sent to MCM and, ultimately, ANZ.

The court found that evidence from bank records shows that there is no evidence that Come Harvest or Mega Wealth ever paid enough money to Straits to legitimately claim to have purchased the nickel.

Although on paper the two companies purchased US$322.1mn of nickel from Straits, they only ever paid the company US$21.6mn. Last year the London High Court found payments from Come Harvest and Mega Wealth to Straits were effectively a fee for use of the receipt copies.

The judgements in Hong Kong and London now mean that both ANZ and MCM have been separately awarded damages of almost US$300mn arising from the fraud, all payable by an overlapping group of companies.

MCM struck a deal with ANZ in 2017 to settle its liability to the bank over the losses, but that liability is lessened depending on how much of the loss ANZ can recoup through the Hong Kong court case.