Trafigura has revealed it could lose more than half a billion dollars after falling foul of a “systematic fraud” allegedly carried out by a group of commodity traders, including London-headquartered TMT Metals.

In a statement issued on February 9, Trafigura says it is taking legal action against Prateek Gupta, as well as a group of companies “connected to and apparently controlled by” the Indian businessman, including TMT and unnamed companies owned by UD Trading Group.

“The fraud concerns containerised nickel in transit during 2022 and involved misrepresentation and presentation of a variety of false documentation,” Trafigura says.

“Since late December 2022, a small proportion of the containers purchased from these companies have been inspected as they reached their destination, and were found not to contain nickel.”

It adds the majority of shipments are still in transit and await inspection.

Trafigura estimates it could face total losses of US$577mn. The company did not comment when asked whether the relevant trades were backed by trade finance lenders, or whether banks are involved in the legal action.

The company says there is no evidence any Trafigura employees were complicit in the alleged illegal activity. However, Bloomberg says the company’s head of nickel and cobalt trading, Socrates Economou, is leaving his position.

Bloomberg says the case has been uncovered over the past two months. A “thorough review” is ongoing, Trafigura says.

The trader adds the allegations are isolated to one line of business, and that it remains committed to the battery metals market. Its net profits for the first half of the 2023 financial year are still expected to increase year-on-year, Trafigura says.

UD Trading Group made headlines in 2020 when it was sued by TransAsia Private Capital, which argued it was owed over US$63mn after financing copper cathode deals.

Fastmarkets reported at the time that UD Trading was founded by Ushdev International, claims the former company denied. Ushdev International went into insolvency in 2020 owing creditors hundreds of millions of dollars.

Last year, former TMT Metals director Prateek Gupta – the subject of Trafigura legal action – was named as a director and guarantor at Ushdev International by India’s Central Bureau of Investigation.

India’s Economic Times reported that the authority was accusing Ushdev International of siphoning off funds and booking sales to overseas companies that were in fact dormant.

TMT Metals and UD Trading Group did not respond when contacted by GTR.

The allegations follow a turbulent period for nickel trading. In March 2022, the London Metal Exchange halted nickel trading and cancelled deals after a dramatic spike in prices – a move it described at the time as “unprecedented”, and which prompted a probe by UK regulators.

In April 2021, investors in an alleged billion-dollar nickel trading scam in Singapore were told they would be unlikely to recover funds, after accusations of fraud and forgery against Envy Group director Ng Yu Zhi.

And in February last year, a UK court awarded ED&F Man US$282mn in damages after finding it was the victim of warehouse receipt fraud – a case that entangled several banks in 2017.