In Feb 2023, Mauritian regulators examined Silver Bank in the wake of Trafigura nickel fraud case.

On February 21 2023, Reuters and the Financial Times reported that Mauritian regulators are examining Silver Bank, whose majority owner has links to the alleged perpetrator Prateek Gupta of a $577 million nickel scam revealed this month by commodities giant Trafigura Group,

A director at Mauritius-based Silver Bank and a director at its sole shareholder have both previously worked for Indian businessman Prateek Gupta, the report said, citing documents seen by the FT.

The Bank of Mauritius confirmed to the FT that the counterparty involved in the alleged fraud against Trafigura is linked to one of the ultimate beneficial owners of Silver Bank.

The central bank will take any necessary regulatory action it may deem appropriate in light of its current examination, it told the newspaper.

Bank of Mauritius and Silver Bank did not immediately respond to requests from Reuters for comment.

Trafigura has launched legal proceedings against Gupta and a group of companies connected to and controlled by him after having found that some nickel cargoes it received did not contain the metal.

Gupta's lawyers have said as the matter is before the courts, their client would respond in court.

THE STORY

Indian business tycoon Prateek Gupta offered to pay Trafigura $US15 million ($22.4 million) using financing from a Mauritian bank under scrutiny for its ties to the accused fraudster, according to court documents obtained by the Financial Times.

This month, Trafigura, the world's largest private metals trader, secured a $US625 million freezing order against Mr Gupta and his business empire in one of London's biggest commodities lawsuits.

Trafigura has accused Prateek Gupta of perpetrating a "systematic fraud" against it involving fake nickel cargoes.  

The trading house has accused the Dubai-based businessman of perpetrating a "systematic fraud" against it involving fake nickel cargoes, forcing it to take a $US577 million writedown.

Mr Gupta's metals trading empire spans Europe, the Middle East and Asia, and Trafigura also alleges that he appears to have interests in a range of other businesses including energy and engineering companies.

The fallout of the case has also spread to Mauritius, where banking regulators are examining Silver Bank, a small lender that has links to Mr Gupta.

• Silver Bank has denied that the metals trader is one of its shareholders and told the Financial Times this week it "has no direct or indirect exposure to Mr Gupta or linked companies and individuals".

However, the lender is likely to come under more scrutiny over its links with the businessman.

In an affidavit filed to London's High Court this month, Trafigura's former head nickel trader, Socrates Oikonomou, detailed how Mr Gupta offered financing from Silver Bank as part of several proposals aimed at "repairing the rapidly deteriorating trading relationship".

Not compliant with contracts

The relationship started to deteriorate when Trafigura discovered in November that some nickel containers it had purchased contained far less valuable metal instead.

Trafigura, one of the world's main conduits for metals trading, has so far inspected about 156 out of 1104 containers related to the alleged fraud. It said none of them contained material compliant with the contracts.

Mr Oikonomou stated Mr Gupta "offered to provide two letters of credit totalling $US15 million from Silver Bank" on January 11, before revising it down to $US7 million later that month.

Mr Oikonomou added that the pair "subsequently discussed some draft wording for the purposes of the letters of credit".

Letters of credit are one of the key financing tools that underpin global trade, providing sellers of goods with an assurance that a financial institution will cover any shortfall if a buyer fails to pay.

The affidavit also reveals that Mr Gupta claimed to have offered further letters of credit to the trading arm of Indonesian mining company Mind ID.

The miner had become ensnared in the fiasco when it purchased cargoes purporting to contain nickel from Trafigura that had originated from the metal trader's companies.

"We have verbally offered them Silver Bank lc [letters of credit] solution," Mr Gupta told Mr Oikonomou in a January WhatsApp message quoted in the affidavit.

In a separate affidavit, a lawyer acting for Trafigura argued that this series of offers "suggests that Mr Gupta considers that Silver Bank will act at his direction".

Silver Bank, Mr Gupta and Mind ID did not respond to requests for comment.

A representative for Mr Gupta said on Friday he was preparing a "robust response" to Trafigura's allegations and planned to "file an application to remove the freezing order on or before April 6".

Assets offered as security

Silver Bank's sole shareholder is the Cayman Island investment firm Silver Star SPC, which acquired the lender out of conservatorship in October 2021 and injected $US40 million of capital to bolster its balance sheet.

Trafigura's lawyer also argues in his affidavit that "Mr Gupta may have some interest in Silver Star and/or exercise control over it" because the metals trader also offered up security over a number of its assets.

Mr Gupta offered Trafigura security over Singaporean renewable energy company Ultravolt Power, whose sole shareholder is Silver Star, according to Mr Oikonomou's affidavit.

Other assets were also proposed as part of a wide-ranging security package, including a "project value chain solutions company called Hangji Global Limited".

Corporate filings in Cyprus, where Hangji's thinly traded shares are listed, show that Mr Gupta incorporated the company in 2015 before its shares were transferred to several offshore vehicles.

Silver Star, Ultravolt and Hangji did not respond to requests for comment.

Sources

• https://www.reuters.com/markets/commodities/mauritian-regulators-examine-silver-bank-wake-trafigura-nickel-fraud-case-ft-2023-02-21/
• https://www.ft.com/content/9a3683a5-f4c8-4b54-937f-fb00ad194966
• https://www.afr.com/companies/mining/trafigura-offered-22m-from-alleged-nickel-fraudster-using-mauritian-bank-20230227-p5cnyn