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A trade finance fund owned by Dubai’s Rasmala Investment Bank is suing Trafigura over a series of allegedly fraudulent coal trades, accusing staff at the commodity trading giant of overlooking forged documents in order to recover debts.

Rasmala Trade Finance Fund says in the lawsuit, filed last month in London’s High Court of Justice and obtained by GTR, that it had provided around US$22.6mn to UAE-based Farlin Energy & Commodities in order to facilitate several purchases of coal from Trafigura.

However, the fund now believes that those trades did not take place, and that the financing was actually used to service pre-existing debts that Farlin owed to Trafigura. Farlin is believed to have ceased operations in 2018.

Arguing that Trafigura was aware those transactions were not real and all supporting documentation had been forged, Rasmala is attempting to force the Singapore-headquartered trader to repay the outstanding balance, which it says stands at just under US$21.6mn.

“During the period in question, Trafigura systematically applied financiers’ advances against Farlin’s historic debts rather than against the fresh, assignable, shipments which the financiers believed they were funding,” the lawsuit alleges.

“In essence, Trafigura was maintaining, for its insolvent customer, a Ponzi scheme whereby new advances, procured fraudulently, were used to pay off old debts that Farlin could not have properly or honestly serviced.”

A spokesperson for Trafigura tells GTR: “We cannot comment on legal matters. Trafigura denies any wrongdoing and is defending this matter.”

Farlin no longer has an active website and former executives could not be reached.

 

Forged documents and historic debts

The lawsuit relates to a murabaha facility that Rasmala provided to Farlin in July 2017.

Under the facility, a sharia-compliant form of finance, Rasmala would advance funds to the seller and take ownership of the commodities being traded. Rasmala would then transfer that ownership to Farlin in exchange for the cost plus a mark-up.

Rasmala says Farlin submitted five requests for fund advances between August 2017 and February 2018, each of which were to purchase coal from Trafigura and were supported by contracts with unique seven-digit reference numbers.

Rasmala made those payments “believing that it was obliged to” and that it had security in the form of receivables owed to Farlin from the on-sales of the coal being purchased.

However, Rasmala says it now believes those requests were “bogus” and “accompanied by fabricated purchase documents”.

In three cases, Rasmala says it was informed by Trafigura in 2020 that no such contracts existed with Farlin, and that “documents that Farlin supplied to Rasmala… were forgeries”, it says.

In other cases, the company says Farlin had sought multiple financing for the same cargo.

For example, Rasmala advanced US$4.4mn to Trafigura in September 2017 for the purchase of coal, due to be shipped the following month.

However, Rasmala alleges that Farlin presented a forged version of a legitimate contract from July the same year, which bore the same reference number. That legitimate contract was ultimately financed by another bank which transferred the funds to Trafigura in November.

Rasmala adds that it believes the allegedly fake transactions were in fact designed to raise funds for Farlin that it could use to repay historic debts to Trafigura.

The lawsuit attempts to tie financing obtained by Farlin to specific pre-existing debts. For example, it suggests that an advance of around US$4.4mn from Rasmala was in reality put towards repayments for cargo shipped on two other vessels.

In total, Rasmala claims to have matched US$39.1mn that Farlin was able to raise from multiple financiers to the same amount in debt to Trafigura.

 

Was Trafigura aware?

Crucially, Rasmala argues that Trafigura had knowledge of Farlin’s allegedly fraudulent scheme, and so should be required to repay the lost funds.

It alleges that Trafigura’s involvement was overseen by three members of staff – Gaurav Gupta, Saurabh Gokhale and Harsh Jasani – two of whom still work at the company according to public information.

Rasmala says it sent confirmation of payment for each transaction to Farlin, which would then be sent onto Trafigura.

In the alleged double financing case, the lawsuit cites email correspondence from Gupta in which he refers to the figure paid by Rasmala, which suggests emails were indeed forwarded on.

Trafigura denies it received letters confirming payments had been made, however.

The lawsuit also says tripartite agreements were drawn up at Trafigura’s request, with Farlin and Rasmala named as the other parties.

These agreements “bore forged signatures purportedly on behalf of Rasmala”, the financier says, adding that it was unaware of the agreements’ existence until it started investigating Farlin’s activity, it alleges.

According to Rasmala, Trafigura requested those agreements be drawn up in order to “create a documentary trail”, showing that Rasmala “consented to Trafigura’s applying the payments to Farlin’s historic debts”.

Either Trafigura knew Rasmala did not consent to that arrangement in reality, and so overlooked the forged documents, or was reckless in accepting those documents, it alleges.

Rasmala is seeking a court order that would force Trafigura to pay US$21.6mn.