ED&F Man and Straits point fingers in $284 million metals fraud trial

CWT International

12/11/2021 14:52

By Eric Onstad
    LONDON, Nov 12 (Reuters) - Broker ED&F Man and Singapore
commodities trader Straits wrapped up a metals fraud trial on
Friday, blaming each other after warehouse receipts for nickel
stored in Singapore worth $284 million were discovered to be
fraudulent.
    The practice of using metal as collateral in warehouse
financial deals came under increasing scrutiny after a $3
billion fraud in 2014 https://www.reuters.com/article/us-china-metals-fraud-idUSKBN1O91G8
 at Qingdao port in China.
    ED&F Man Capital Markets (MCM) and Straits agree that
warehouse ownership documents provided to MCM in 2016 were
forged, but they dispute who was responsible.
    MCM is a unit of private commodities merchant ED&F Man,
which brought civil cases in London against 10 defendants to
recoup the $284 million it paid for the warehouse receipts. 
    MCM accused Straits (Singapore) PTE Ltd of providing scanned
warehouse receipts to two Hong Kong based companies which MCM
said later sent fraudulent documents based on them to MCM.
    Straits Singapore is a unit of Straits Financial, itself
owned by logistics group CWT International Ltd  0521.HK . 
    "It's not only a question of lying, but entering into a
highly suspicious series of transactions, we say, which have
been camouflaged by use of sham contractual documents," MCM
barrister Huw Davies told the court.
    Straits knew that fraudulent activity was occurring or at
least turned a blind eye, MCM alleges.  
    Straits said that providing scanned warehouse receipts is
common industry practice to show potential buyers what is on
offer.
    "We say Straits were being actively misled," said Straits
barrister David Lewis. "It will be unprecedented to find that a
party was in on the conspiracy when it was being misled by the
inner circle of conspirators."
    MCM failed to undertake due diligence and verify the
documents before making payment, Straits said.
    When MCM originally filed the case https://www.reuters.com/article/us-metals-fraud-ed-fman-idUSKCN1PG1HG
 in 2017, it sued two Hong Kong firms, Come Harvest Holdings Ltd
and Mega Wealth International Trading Ltd, which provided 92
warehouse receipts to MCM. 
    MCM later added Straits and seven other defendants to the
lawsuit, which along with the two Hong Kong firms, all deny
responsibility for fraudulent activity.
    Only MCM and Straits participated in the London trial.

 (Reporting by Eric Onstad;Editing by Kirsten Donovan)
 ((eric.onstad@thomsonreuters.com; +44 20 7542 7093; Twitter https://twitter.com/reutersEricO;
 Reuters Messaging: eric.onstad.thomsonreuters.com@reuters.net))