UD Trading Group, the commodity trader accused by Trafigura of carrying out fraudulent nickel trades, was ordered by a Singapore court in January to pay US$63.3mn to a trade finance lender in a long-running dispute over the financing of metals.

In a decision published on January 30, a Singapore High Court judge found that UD Trading Group Holding Pte Ltd had not honoured guarantees covering debts owed by Canadian company Rutmet to Hong Kong-headquartered TransAsia Private Capital under a 2019 agreement to finance metal purchases.

Assistant Registrar Desmond Chong awarded TransAsia US$63.3mn without a trial, finding that UD Trading’s various defences were “vague, unparticularised”, “defective” and “wholly contrary to the relevant contracts”. UD Trading is appealing the decision.

The judgement, which has not previously been reported, came shortly before Swiss trading giant Trafigura accused companies owned by UD Trading Group or seemingly controlled by its principal Prateek Gupta, including trader TMT Metals, of defrauding it out of as much as US$577mn.

The trader said it had inspected purported cargoes of nickel it purchased from the companies and discovered that they did not contain any nickel. UD Trading has not yet issued a public response to those allegations.

The judgement in TransAsia’s favour is the most significant step so far in a saga that has been afoot since 2020. The case is also the subject of ongoing litigation in Dubai, Toronto and Mumbai.

TransAsia did not respond to requests for comment by phone and email. A person who answered the phone at UD Trading’s Singapore office declined to answer questions about the ruling.

Asked to respond on behalf of UD Trading, Singapore lawyer Eugene Thuraisingam, whose eponymous firm is representing the company in the dispute, says: “We are unable to comment as the matter is on appeal before the High Court and sub judice.”


Security arguments

According to the judgement and related court filings in Canada, TransAsia extended a US$63mn facility to Rutmet, whose ownership and relationship with UD Trading is unclear, to finance the purchase of metals from suppliers Triton Metallix Ltd and API International FZC.

It then sold them to various companies in the UD Trading group and two other firms, Mine Craft Ltd and Metal Masters FZE.

The transactions were insured by a trade credit insurance policy from Export Development Canada (EDC), Canada’s export credit agency.

In order to renew EDC’s coverage, Gupta agreed that UD Trading Group Holding Pte Ltd would provide a guarantee for Rutmet’s liabilities. Canadian court documents also show that Gupta signed a personal guarantee, although he is not a named defendant in the Singapore case.

From September 2019, Rutmet defaulted on all its repayments to TransAsia, according to the Singapore judgement. Separate amounts owed by UD Trading companies also remain outstanding.

After failing to elicit any repayment from Rutmet, TransAsia turned to Gupta to honour the guarantees. However, in court proceedings in Singapore and Canada, UD Trading argued that its liabilities to TransAsia had already been met.

It claimed that because TransAsia had improperly taken possession of two security pledges – of shares in both a Cyprus-listed trading company and a gold mine in Australia – made under a separate loan agreement with UD Trading, its debts to the financier had been satisfied.

But Assistant Registrar Chong found that UD Trading failed to back up that argument. While the company produced emails and other evidence suggesting TransAsia’s David Sullivan, a managing partner, discussed using the pledges as security for the Rutmet loan, it could not point to any evidence that the financier had ultimately agreed to do so or that any contract was signed.

The judgement said UD Trading’s defence on that front “was plainly legally and factually unsustainable, and should be struck out”.

The court also agreed with TransAsia that the guarantees provided were straightforward on demand performance guarantees, overruling UD Trading’s counterarguments.

“In summary, despite the best efforts of the defendants’ counsel, I found that this was a plain and obvious case for the defendants’ defences to be struck out,” Chong wrote. “The defendants’ defences were not only defective but also entirely contradicted by the plain text of the guarantee and the other contracts and documents raised by the parties. On the other hand, the plaintiffs’ pleaded case was clear and straightforward.”


Eyes on Canada

In related litigation in Canada, UD Trading and TransAsia filed claims against each other, with the former seeking to suspend the proceedings against it in Singapore and Dubai and pursuing damages of US$650mn. Those proceedings were permanently stayed by a judge in 2021.

TransAsia also filed a separate legal claim against EDC, saying the agency is obliged to pay it the amounts owed by Rutmet under the insurance policy. EDC argued that it cannot do so while disputes are still being thrashed out in Asia.

In December last year, a judge in Ontario’s Superior Court of Justice stayed TransAsia’s claim against EDC until the conclusion of the court cases in Singapore and Dubai.

Indian court records show that Mine Craft Ltd is also taking legal action in the Bombay High Court against Ushdev International, a trading company undergoing a restructuring process in India of which Gupta is reportedly a director, although details of Mine Craft’s case could not immediately be determined.

Last week Trafigura said the alleged fraud orchestrated by Gupta “concerns containerised nickel in transit during 2022 and involved misrepresentation and presentation of a variety of false documentation”. It has since obtained a worldwide freezing order against Gupta, Bloomberg has reported. Such orders are intended to prevent defendants from shifting their assets while legal proceedings are underway.

Citing court documents, the news agency has also reported that the relationship with Trafigura began to unravel when Citi stopped financing some of the trades between Trafigura and UD Trading Group companies and that so far 156 cargoes inspected did not contained any nickel or nickel alloys.

Gupta has reportedly claimed to Trafigura that the missing nickel is the fault of an unnamed business partner in India.