Trafigura accounts frozen in alleged fraud
Print Edition
CHINESE police have frozen two bank accounts held by Trafigura, one of the world’s three largest private oil and metals traders, as the authorities investigate an alleged US$32 million gasoline trade fraud, according to three sources.
Police have held Beijing-based Trafigura employee Tian Meng since August in the northern city of Cangzhou and can detain him for up to seven months without charge.
The investigation was launched after private Chinese trader Qingdao United Energy told police it had lost US$32 million when a trader, Zhang Wei, arranged trade financing deals with Tian that used QUE’s letters of credit without its consent to cancel out Zhang’s personal trading losses with Trafigura, sources have said.
According to two sources with direct knowledge of the matter and another who had been briefed by police, the police last month froze one account at the Industrial and Commercial Bank of China and another at the Bank of China, both held in Shanghai by Trafigura Pte Ltd, a Singapore unit.
Trafigura will be anxious to avoid any disruption to its business in Shanghai, the hub for its metals activity in China, the world’s largest buyer of most commodities.
“This will first hamper (Trafigura) obtaining financing in the relevant Chinese banks,” said a senior China-based trader with a Western trading house. “If the news spreads, other Chinese banks will be scared off, too.”
In late February, police told prosecutors they proposed a charge of contract fraud against Tian, Zhang and Trafigura Pte Ltd, the sources said.
A senior Trafigura source, however, said the company was aware of the latest developments in China and of the proposed charges.
“As far as we are concerned, there is no change in the substance of this matter, which is a commercial dispute and not a matter for police or state prosecutors,” said the source.
“We believe the prosecutors will conclude there are no charges to answer, but if any are brought we will vigorously contest them.”
Two of the sources said police believed the Swiss trader’s Singapore-based trade operation helped arrange the gasoline financing deal, after investigators went through e-mail traffic Zhang turned in to police.
Prosecutors could revise the charge over the next five months and might ask the investigators to gather more evidence.
In late 2014, the same senior Trafigura source said Zhang had gathered losses of US$32 million by late 2013 and agreed to a financing scheme with Tian and the Singapore-based gasoline team to settle the losses.
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