Cargill has said a Russian bank’s fraud claim is “riddled with factual inaccuracies, specious logic and baseless innuendo”, as the trading giant fights the bank’s attempt to access some of its transaction records.

Russia’s Trust Bank, which is controlled by the Russian central bank, has filed a claim in the British Virgin Islands (BVI) for more than US$1bn in damages against Cargill and other major traders over what it alleges was a multi-year trade finance fraud.

The bank claims that the traders, also including the Louis Dreyfus Company, Bunge, Quadra Commodities and Liberty Commodities, helped Russian businessman Mikail Shishkhanov defraud Binbank and Rost Bank, lenders he owned until they were taken over by the Central Bank of Russia and rolled into Trust Bank in 2018.

Trust Bank first made the allegations against Cargill and the other traders in a New York court claim in January, in which the lender sought subpoenas for banking records relating to the commodity traders’ dealings with several offshore companies linked to Shishkhanov.

New York judge Paul G Gardephe gave the bank permission to serve the subpoenas in April, overriding the objections of Cargill and Louis Dreyfus. But late last month, Cargill launched a court action to have the subpoenas quashed, with Louis Dreyfus mounting a similar challenge.

Daniel Stein, a lawyer representing Cargill, said in a written declaration filed with the court on April 29 that Trust Bank’s “wildly inaccurate” allegations were based on a misunderstanding of trade finance.

“Stripped of all of the supposition, misrepresentations, unsupported statements of belief, and innuendo, the transactions described in the [bank’s] declaration are legitimate structured trade finance transactions that Cargill (and multiple other companies) conducted with its then-customer [Binbank],” Stein said.

Trust Bank had alleged, in its January application for the subpoenas, that the traders arranged some 122 letters of credit (LCs) through Binbank between 2013 and 2017, but then on-lent the proceeds to shell companies controlled by Shishkhanov and assigned the rights to those loans to Binbank.

In the bank’s telling, this left Binbank holding loans that were, on paper, to creditworthy global traders, when in reality the bank was exposed to offshore shell companies with no known assets, allowing Binbank to circumvent Russian capital requirement rules. Trust Bank’s filing included an example involving Cargill and Diamond Forca, a BVI company.

Trust Bank claims that through interbank loans, Rost Bank was ultimately left nursing Binbank’s debts. It argued that inconsistencies in the documents indicate that the underlying transactions were fraudulent, as they suggest that the shipments did not actually take place.

Cargill lawyer Stein countered that there is a clear paper trail “documenting the transactions’ legitimacy” and that trade transactions are frequently structured for financial purposes rather than to facilitate the physical movement of goods, which may be bought and sold multiple times before being delivered to an ultimate buyer.

“Experienced participants in international commodities trades routinely buy and sell goods on the high seas without any expectation that the goods will be delivered,” Stein said. “These trades are commonly done for financial, rather than commercial purposes.”

He cited, among other cases, the dismissal by Singapore’s High Court last year of a fraud claim by Italian bank UniCredit, in which the court found that back-to-back trades conducted by Glencore with collapsed trader Hin Leong were legitimate.

Stein said Cargill’s obligation to repay the letter of credit in the example provided by Trust Bank was settled on maturity through a loan to Diamond Forca, which it described as “a party under [Binbank]’s administrative control”. Cargill “assigned its right to collect on that loan to [Binbank] in full satisfaction of its repayment obligations under the letter of credit”, he said.

Cargill and Binbank transparently linked the LC and the loan to Diamond Forca and “the transaction then proceeded as the parties intended, all payments were made as required, and no party suffered any loss”, Stein wrote.

It lambasted Trust Bank’s January filing seeking the subpoenas, submitted by English Steptoe & Johnson solicitor Neil Dooley.

“The substance of his declaration – which is replete with errors, false assumptions, and fundamental misunderstandings – suggests he has no relevant experience,” Stein wrote. “This entire hearsay declaration – and all the facts and theories undergirding the supposedly forthcoming BVI litigation – can be dismissed out of hand.”

Arguing for the subpoenas – issued to banks including Deutsche Bank, JP Morgan and Standard Chartered – to be quashed, Stein claimed Trust Bank had no chance of bringing proceedings in the BVI. The lawyer suggested there is only a “tangential” connection between the allegations and the jurisdiction, and that at least one of the BVI entities it is targeting is dissolved and is unable to participate in any proceedings.

Stein also emphasised the Russian central bank’s control over Trust Bank, arguing the court must be sure that the subpoenas are not a “fishing expedition for some unstated, potentially nefarious purpose”.

“This request is unimaginably intrusive because it represents a blatant attempt by an entity that is demonstrably controlled by Russia’s Central Bank to obtain records from Western businesses under the guise of a foreign proceeding,” Stein said.

The lawyer added that sanctions imposed on the Russian central bank governor following the invasion of Ukraine were likely to prevent Trust Bank from hiring local lawyers and there was no evidence the bank was preparing to bring a claim.

But shortly after Cargill and Louis Dreyfus launched their attempts to nix the subpoenas, Trust Bank filed its claim in the British Virgin Islands against the duo, 18 further trading groups, Shishkhanov and a slew of BVI companies, according to a statement by the bank and a claim form seen by GTR. The claim was filed by Emery Cooke, a BVI law firm.

The value of all the LCs issued by Binbank to the traders is US$3.2bn, according to the bank’s January court filing, but its statement on the BVI claim said it was for “over $1 billion”. A bank spokesperson says the calculation of alleged damages is still underway.

Louis Dreyfus’ attempt to quash the subpoenas cited similar reasons to Cargill’s and supported its rival’s rebuttal of Trust Bank’s allegations. It added that most of the contracts involving Louis Dreyfus contained clauses requiring any disputes to be subject to London arbitration.

Cargill, Bunge and Quadra Commodities did not respond to written questions. Louis Dreyfus and Liberty Commodities declined to comment. A lawyer who has represented Shishkhanov in UK litigation did not immediately respond to a request for comment on behalf of the businessman, who is understood to be living outside of Russia.

A Trust Bank spokesperson says it “will provide a comprehensive and substantial response to all of Cargill’s statements within the appropriate timeframe during the relevant proceedings”. The spokesperson added that other courts had recognised its case against the traders, but declined to name them when asked by GTR.