Singapore-based fintech firm Triterras, which operates the Kratos trade finance platform, is facing legal challenges over its possible exposure to former sister company Rhodium Resources.

Several US law firms, including Bernstein Liebhard, Schall Law and Klein Law Firm, are appealing to Triterras investors to join a class action lawsuit against the company, alleging they were misled about the extent to which it was financially dependent on Rhodium, a commodities trader that has fallen into financial difficulties.

Srinivas Koneru, Triterras’ founder, executive chairman and chief executive, is also founder and director of Rhodium, which now trades as Antanium Resources, and Triterras’ initial launch involved moving Rhodium customers onto its platform.

However, Triterras was acquired by special purpose vehicle Netfin in November, with investors told the company would expand quickly and move away from its reliance on Rhodium customers.

In mid-December, Triterras’ share price fell suddenly following a US Securities and Exchange Commission filing in which it disclosed financial concerns at Rhodium.

Rhodium had been given a statutory demand for payment from one of its creditors, the filing says, adding that under Singapore law, that would mean a bankruptcy application could be filed against Rhodium if it did not respond to the demand within 21 days.

Rhodium’s “traditional commodity trading business has been adversely impacted by the Covid-19 pandemic and the lack of availability of trade finance funding for commodity trades involving SMEs”, the filing adds.

According to a lawsuit filed in a New York district court by Bernstein Liebhard, a law firm that specialises in claims on behalf of investors, the need for that disclosure suggests Triterras had failed to inform investors of the extent to which its revenue growth “was dependent on Triterras’ relationship with Rhodium”.

It says investors should have been told Rhodium faced “significant financial liabilities that jeopardised its ability to continue as a going concern” and that, as a result, was “likely to refer fewer users to the company’s Kratos platform”.

Similar claims have also been filed by a cluster of other law firms, all of which are urging investors in Triterras to join the class action. Triterras did not respond to multiple requests for comment from GTR.

A Triterras and Netfin investor presentation from July 2020, seen by GTR, explains that Triterras intended to use Rhodium’s existing business only as “the necessary kickstart to launch the [Kratos] platform by infusing a community of traders”.

“Rhodium brought its network of credit insurance companies to the platform to collaborate with other third-party lenders in the Kratos Trade Finance Module,” it says.

For the 2019 financial year, the presentation says the initial group of 52 clients carried out transactions worth around US$3.68bn.

In the following years, each party added to the platform would have “the potential to add their multiple counterparties”, resulting in “exponential organic growth, it says.

Projected client numbers and transaction volumes for the financial year ending 2020 were 200 and US$88bn. Those figures rise to 500 clients and US$17bn in transactions the year after, and eventually to 1,500 clients and US$37bn in transactions by the end of FY2023.

At the time of the presentation, transaction volumes over four months ending in June 2020 were given as US$2.9bn, equivalent to US$720mn a month.

The company said this made Kratos “the only non-petroleum commodity trade and trade finance blockchain-enabled platform of scale” on the market.

A Covid-19 impact assessment also included in the presentation did not mentioned Rhodium, but said that “less liquidity and fewer lending sources are exacerbating the current US$1.5trn annual shortage in trade finance, creating an even more compelling need for trade finance solutions”.

Rhodium had previously been sued by Maybank, Malaysia’s largest bank, over its failure to make a US$3.16mn payment for four bills of exchange drawn by Intra Asia Trading, of which it was a customer, according to a September Bloomberg report.