By Polina Devitt, Eric Onstad and Pratima Desai
LONDON (Reuters) -Lawyers for Indian businessman Prateek Gupta rejected commodity trader Trafigura’s allegations of fraud, saying Trafigura employees proposed that Gupta substitute other materials for nickel, according to a court document filed on Wednesday.
Geneva-based Trafigura filed a lawsuit against Gupta in February, alleging seven companies that Trafigura said are controlled by him carried out “systematic fraud” over nickel cargoes.
At issue is whether Gupta’s companies substituted other, less valuable, materials for nickel.
“The arrangement to agree contracts with Trafigura for the sale and purchase of nickel but in fact to trade other material was devised and proposed by Trafigura acting by its then employees,” the document, which outlines Gupta’s defence, said.
Reuters could not independently establish the accuracy of the claims.
Trafigura said in a statement: “Trafigura does not consider the defence to be credible and will vigorously continue to pursue its claim.”
Gupta’s lawyers said in the court document that Trafigura’s head of nickel Sokratis Oikonomou and trader Harshdeep Bhatia were among those who proposed trading other material instead of pure nickel.
Bhatia did not immediately respond to a request on LinkedIn for comment, while Reuters was not able to reach Oikonomou, who no longer works for Trafigura.
Trafigura’s metals division booked a $590 million impairment in its October-March financial results due to the alleged nickel fraud.
In court papers submitted previously, Trafigura had said it began to suspect in October last year that around 25,000 metric tons of metal sold by Gupta’s firms may not be high-grade nickel, and started inspecting more than 1,000 shipping containers.
Trafigura told a judge that some of the first containers inspected were found to contain carbon steel, worth a fraction of the price of nickel.
The defence document filed on Wednesday said that at an alleged meeting in Mumbai in March 2019, Bhatia said Trafigura wanted to increase its trading volume in nickel to around 50,000 metric tons a year, but Gupta said his firm would be unable to source that amount.
Later, in a WhatsApp message, Gupta and Bhatia discussed trading scrap metal and other metal alloys to boost trading volumes, the document claimed.
“Oikonomou and Bhatia stressed to Mr. Gupta that the actual purity, specification and value of the materials in fact being traded was unimportant to Trafigura,” the document said, referring to an alleged meeting in Dubai in June 2019.
A stumbling block was the fact that Citibank was financing the trades, the document said.
“The need to make it appear as if Trafigura was trading nickel was because Trafigura’s financing bank, Citigroup … was generally not prepared to extend credit for trades of nickel with purity of less than 99.8%,” the document claimed.
Citibank declined to comment.
Around August 2019, Bhatia contacted Gupta by phone “confirming that Mr. Oikonomou was keen to move forward with the arrangement, but that it would need to be kept quiet”, the document claimed.
The defence document alleged that in September of the same year, a Gupta representative agreed with Trafigura that other companies would participate in the arrangement “to reduce the risk of red flags being raised with Citi as a result of high volumes of trades being conducted”.
(Reporting by Eric Onstad, Polina Devitt and Pratima Desai. Editing by Jane Merriman and Emelia Sithole-Matarise)