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Westford Trade Services has fiercely hit back at allegations it misled potential financiers by manipulating its exposure to since-collapsed trader Phoenix Commodities. 

The claims were made in November by Dubai Insurance Co, which is being sued by Westford in Dubai over its refusal to cover losses arising from the downfall of scandal-hit Phoenix.  

The insurer alleged in an updated defence filing that Westford and Phoenix “appear to have operated a practice of deliberate manipulation of purported liabilities”. 

The filing cites a spreadsheet setting out sums due between Westford and Phoenix, which had traded together since 2015.  

According to Dubai Insurance, the spreadsheet contains several unclear or inconsistent entries, and suggests Westford “manipulated the degree to which [it] and/or Phoenix itself was apparently exposed to credit risk”. 

Westford also “represented to third parties for financing purposes exposures which had been so manipulated”, it alleges. 

But in a reply submitted to the courts last month, Westford strongly refutes those claims. 

“The spreadsheet was prepared for internal use by the Westford Group, and only shared with Phoenix in an attempt to get Phoenix to pay its debts to the Westford Group on time,” its reply to the insurer says. 

“It was not intended to be, and was not, shown to third parties. It was not intended to amend any underlying documents such as contracts or invoices governing the amount owed by Phoenix or any other party.” 

The allegation that the spreadsheet was shown to third parties for financing purposes “is without any pleaded factual foundation”, it adds.  

“It is utterly improper and should not have been pleaded. It is denied.” 

Westford has also responded to suggestions made by Dubai Insurance that commodity sales were not genuine transactions. 

In one case, Westford purchased goods from Uno Trading before immediately selling them onto Phoenix on 120-day payment terms. Phoenix entered liquidation before paying for the goods, prompting Westford to submit a claim for reimbursement by Dubai Insurance. 

But the insurer has since said due diligence reports could not verify the existence of Uno Trading. It adds that Westford sought to repay Uno Trading by reassigning a receivable it was due following commodity sales to Darintech Singapore – but that company had been struck off the city state’s corporate registry more than two years previously. 

Dubai Insurance goes further, saying it believes Westford and Phoenix “appear to have been capable of arranging for the creation of invoices purporting to be issued by Uno Trading”. 

The insurer says that in April 2020, Westford said Phoenix failed to provide an invoice from Uno Trading when required to do so. Westford then “arranged for an old Uno Trading invoice to be used as a template for the production of a new purported Uno Trading invoice”, it alleges. 

Documentation identified by Phoenix’s liquidator includes a template Uno Trading invoice spreadsheet, it adds. 

Westford says in response that it had been introduced to Uno Trading’s owner in 2019, and obtained copies of its trade licence and financial statements. 

It also refutes that Darintech ceased trading in 2017, pointing out it filed financial statements and appointed new directors in 2018. It says there was an active relationship between the two firms in 2019, that Uno Trading has never claimed it was not paid by Darintech, and that Westford has no knowledge of the company being struck off. 

And Westford denies it created an invoice on behalf of Uno Trading, saying Phoenix produced the invoice when asked, and adds the allegation is “irrelevant” to the case. 

The dispute comes amid questions over Phoenix’s conduct, including that the commodity trader created a sub-ledger of transactions that seemingly do not correspond to real trades, but were used to raise financing. 

But Westford says those allegations are “irrelevant to the issues in this case, because the defendant does not, and could not, allege that the claimant [Westford] was or ought to have been aware of Phoenix’s fraudulent activities”. 

“If Phoenix has committed a fraud, the claimant is its victim, not its co-conspirator,” it adds. 

The case is currently slated to go to trial in July this year. Representatives for Westford and Dubai Insurance did not comment when contacted by GTR.