QINGDAO: Two fraud cases emerged in Chinese ports which have panicked Citigroup Inc. Mercuria Energy Group Ltd’s lawyer said; “discovery of the fraud was a massive problem for Citi as it was their metal and it was at their risk”.
The disputed copper and aluminum is under lockdown in the ports of Qingdao and Penglai, where Chinese authorities are investigating an alleged fraud. Neither side can get access and they don’t know how much of the metal is there, had Dunning said at a pre-trial hearing in August.
Citigroup says it effectively delivered the metal to Mercuria under the terms of a sale-and-repurchase agreement by handing over warehouse receipts. The bank says it is owed about $270 million. Mercuria, a Cyprus-based firm with major trading operations in Geneva, argues the products were never properly delivered.
“It appears that substantial quantities may be missing from the warehouses or may be the subject of multiple pledges,” Dunning said today.
Citigroup spokesman Simon Boughey didn’t immediately respond to an e-mail seeking comment
The probe at Qingdao, China’s third-largest port, is examining companies owned by a Chinese-Singaporean metals trader, Chen Jihong, who is alleged to have pledged the same metal inventories multiple times for collateral on loans. Chinese authorities have uncovered almost $10 billion in fraudulent trade, including irregularities at Qingdao, according to the country’s currency regulator. Standard Chartered Plc (STAN), Standard Bank Group Ltd. (SBK) and ABN Amro Group NV have also made loans affected by the alleged fraud.
