ED&F Man has filed a $284 million case for fraud against two Hong Kong based companies
(Kitco News) - International Broker ED&F Man has filed a $284 million lawsuitagainst two Hong Kong corporations, alleging that they knowingly providedfraudulent warehouse receipts for nickel stored in Asia, court documents show.
It has been reported that Come Harvest Holdings Ltd (CHH) andMega Wealth International Trading Ltd, have denied the charges. The trial atLondon's High Court that also relates to fraudulent warehouse receipts fornickel is now in its first week.
The case also involves French bank Natixis who is suingcommodities broker Marex Spectron for $32 million. CHH is a defendant inboth the Natixis/Marex suit and the ED&F Man case.
Judge Simon Bryan said he had received an email from lawyersacting for CHH and Mega Wealth expressing concern that proceedings in theNatixis/Marex case would have an impact on their clients in the ED&F Mancase since much of the background was the same.
The warehouse receipts were part of a repo (repurchase) agreement, brokered by ED&F Manbetween Australia and New Zealand Banking Group (ANZ) and the two Hong Kongfirms.
Reuters said, ANZ is not a party to ED&F Man's lawsuit inUK courts, but in June 2017, it filed papers asking the U.S. District Court inSan Francisco to allow it to interview U.S. witnesses about the allegedwarehouse receipt fraud. ANZ declined to comment.
ED&F Man paid $117.3 million to CHH and $167.2 million to MegaWealth for nickel stored in Asian warehouses, but the warehouse receipts thetwo firms provided were forgeries, lawyers for ED&F Man said in courtdocuments.
The ED&F Man documents alleged the two Hong Kong firms knew orhad sufficient reason to suspect the receipts were forged. The two HongKong companies said they had no knowledge that the receipts were fake, adefense filing showed.
The practice of using metal as collateral in warehouse repo dealshas come under increasing scrutiny since a $3 billion fraud four years ago atQingdao port in China, which led to a $440 million fine for the firm involved,Dezheng Resources, and a 23-year jail sentence for its chairman.
By Rajan DhallFor Kitco News
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rdhall@kitco.comwww.kitco.com