LONDON Aug 13 Commodities trading house
Trafigura's warehouse business Impala has become the latest
company to initiate legal action in connection with suspected
metals financing fraud at two of China's ports, according to a
Trafigura has started legal proceedings in London against
two units of U.S. bank Citi and trade house Mercuria
Energy Trading, according to the document written by Citi's
lawyers that outlines the bank's argument in separate, but
related, litigation against Mercuria.
Chinese authorities launched an investigation in May into
whether private metals trading firm Decheng Mining and its
related companies used fake warehouse receipts at Qingdao Port
and nearby Penglai to obtain multiple loans secured against a
single cargo of metal.
The Citi document does not say what action Impala is taking
or why, and it does not implicate Impala, Citi or Mercuria in
the alleged fraud.
But it shows that Impala has joined other trading houses and
global banks, including Mercuria, Citi, Standard Bank
and Standard Chartered Bank, in initiating lawsuits and
counter-suits over an estimated $1 billion exposure to the
suspected fraud in China.
A spokeswoman at Trafigura said the company does not comment
on legal matters. Citi declined to comment on Impala's action
beyond what is contained in its document.
A spokesman for Mercuria said of Trafigura's action: "The
matter is rather complex and we do not estimate it is
appropriate to comment on it at this stage."
The dispute between Citi and Mercuria pivots on contract
obligations and the ownership of metal worth more than $250
million held in warehouses in Penglai and Qingdao. Impala is one
of the warehouse operators in those locations.
The Chinese authorities imposed a lockdown on parts of the
two ports where the metal is held, preventing anyone, including
Citi, Mercuria and the warehouse operators, from accessing the
material, according to Citi's document.
It says there is a range of steps which the party with
responsibility for the metal will need to take.
"The parties will need to know what steps to take against
the warehouse operators," Citi's lawyer Daniel Toledano says in
"In particular, proceedings have already been commenced
against Mercuria and Citi by one of the warehouse operators,
Impala, and the parties need to be able to consider how their
interests are affected by those proceedings and take a view as
to whether, and how, to contest them."
Toledano declined to comment on the case, referring Reuters'
queries to Citi.
(Additional reporting by Melanie Burton in Sydney; editing by
Veronica Brown, Greg Mahlich and Tom Pfeiffer)