Commodity trader successful in fraudulent nickel trade claims

Trafigura Pte Ltd & another -v- Prateek Gupta & others [2026] EWHC 159 (Comm)

In February 2023, Trafigura issued a press release stating it was including a $577m reserve in its accounts for losses relating to “systematic fraud”. Trafigura had discovered that multiple shipments of nickel purchased from a number of different companies owned by, or connected with, Mr Gupta contained rubble or low-value metals.

After Trafigura obtained a worldwide freezing injunction in respect of the assets of Mr Gupta and those companies, Mr Gupta unsuccessfully applied to set aside that injunction. That application laid down a marker as to the arguments he would run in the main trial of this dispute, which was heard in November and December 2025.

In what was a high-profile case due to the extent of the fraud and wider industry interest, Mr Gupta alleged that traders at Trafigura had been complicit in an arrangement that, he alleged, was effectively a financing operation (Arrangement). By taking the arbitrage between different interest rates, Mr Gupta alleged that it was possible for Trafigura to make a profit through the Arrangement. Mr Gupta further alleged that a system of sale and repurchase (repo) trades had been part of the trading relationship between Trafigura and Mr Gupta 2016 under which Trafigura had supposedly been able to make profits.

Trafigura denied that it had been complicit in the Arrangement and factual witness evidence played a leading role in the trial.

The Commercial Court found in favour of Trafigura. The Court determined that Trafigura had no knowledge of the fraud. The Court also found that none of Trafigura’s employees had any involvement in the fraud except as its victims. Trafigura was held to have validly rescinded numerous contracts that were vitiated by fraudulent misrepresentation. Trafigura was also found to be entitled to damages for unlawful means conspiracy and deceit. After giving credit for sums that Trafigura had realised from the sale of certain lower grade materials that had been delivered to it, the Court awarded Trafigura remedies to a total value of about US$500 million.

The judgment necessarily recounts a considerable volume of factual and witness evidence, on which the outcome was heavily dependent. Nonetheless, the decision is a valuable reminder of the risks that can attach to “circular” trading and finance arrangements, which are amplified where higher value commodities are involved. The case has echoes of earlier decisions in which nickel frauds were found to have been perpetrated. An understanding of the risks involved, and the legal remedies that might be available, is important to all those involved in similar transactions, whether as buyers, sellers or commodity finance providers.

This article focuses on the main legal issues that the Court addressed.

The background facts

Trafigura alleged it was the victim of a substantial fraud perpetrated by the defendants, Mr Gupta, (D1), and seven companies (the Corporate Defendants). Mr Gupta was the de facto or legal controller, and indirect shareholder and director of four of the seven Corporate Defendants (D2 to D5). As the Court determined, Mr Gupta was also materially involved in the activities of the remaining Corporate Defendants (D6 to D8).

Trafigura contended that Mr Gupta had masterminded the frauds using the Corporate Defendants. In summary, Trafigura’s case was that it bought from the Corporate Defendants, for around US$500 million, cargoes sold to it as high-quality London Metal Exchange (LME) Grade Nickel when in fact what was supplied, in shipping containers, were metals of low value (such as stainless steel or iron briquettes), or worthless rubble.

LME Grade Nickel (Nickel) is nickel of an LME approved brand with a minimum purity of 99.8% and usually in full plate cathode or briquette form. It is a valuable and highly liquid commodity which has many industrial uses.

The principal claims

Trafigura alleged it suffered losses resulting from a conspiracy to defraud, which was devised by Mr Gupta and implemented by, and through, the Corporate Defendants. Its case was as follows.

Between 2021 and 2022, Trafigura was fraudulently induced to enter into a series of Nickel purchase contracts with one of the Corporate Defendants. Under each such contract, the relevant Defendant company sold and agreed to deliver Nickel to Trafigura in instalments while never honestly intending to perform its obligations to deliver Nickel. These Corporate Defendants, orchestrated by Mr Gupta and pursuant to a conspiracy with him (and amongst themselves), lied to Trafigura about what they were planning to sell and ship pursuant to the contracts being negotiated, which were always understood to be for Nickel. False descriptions were given by the Corporate Defendants in the multiple shipping and commercial documents including Bills of Lading (BLs), and insurance certificates in respect of the relevant cargoes. A Singaporean logistics company, Techies, acted as Gupta’s agent in the issuing of fraudulent BLs.

Aside from the very significant losses incurred from having paid for low-value, or even worthless, materials, Trafigura incurred liabilities to third parties to whom it had unknowingly on-sold what it believed to be Nickel. Trafigura’s claims included damages in respect of those liabilities, following confidential settlements that were reached between Trafigura and its buyers. Hill Dickinson acted for one of the third parties named in this judgment, Hyphen Trading.

It was accepted by all parties that the documents all falsely stated on their face that the cargoes sold to Trafigura by the Corporate Defendants were Nickel. It was also common ground that the cargoes, when eventually inspected, did not contain Nickel. Trafigura stated that the fraud was discovered at the end of 2022 as inspections of the containers began to reveal what they contained. It submitted that it did not know about the full scale of the fraud until early 2023.

Trafigura brought its claims in respect of 107 trades/cargoes for which it had collectively paid the Corporate Defendants about US$500 million. Trafigura argued that it had validly rescinded the contracts and/or individual trades in respect of 91 shipments of cargo (the Main Trades) which it possessed (and to which it held title) at the end of 2022. With one relatively limited exception, each of the cargoes of the actual low value material supplied under these trades has been sold by Trafigura for just under US$10 million, namely for around 2% of what Trafigura paid to the Corporate Defendants for the cargoes. Trafigura pursued a number of additional/alternative tortious and contractual causes of action relating to the Main Trades, but its main claims were for rescission for fraudulent misrepresentation and proprietary relief. A successful proprietary claim would permit Trafigura to trace the proceeds of the frauds into other property and proceeds that had passed into the hands of the Defendants.

The main defences

Only Mr Gupta and one of the other Defendants (D2) were represented for the full length of the trial, although D3 to D5 were represented for part of that period while D6 to D8 were not represented.

The principal defence was that Trafigura had at a senior level (i.e. through senior employees) orchestrated and actively participated in the allegedly fraudulent acts. That alleged Arrangement was effectively said to have been a scheme involving the creation of false shipping documents where Trafigura agreed to purchase what purported to be Nickel, but what might actually have been far less valuable material, with a view to its subsequent sale back pursuant to a sale and repurchase (repo) financing arrangement. According to Mr Gupta, there was widespread knowledge of the Arrangement within Trafigura.

Mr Gupta contended that Trafigura's claimed knowledge of, agreement to, and participation in the Arrangement provided a complete defence to the claims and that the existence of the Arrangement was supported by the documentary evidence that, according to him, contained many "red flags". Accordingly, to support the defence of the claims on technical legal grounds, Mr Gupta and the other Defendants accepted that the frauds had taken place, including the fabrication of false shipping documents on a large scale.

Trafigura denied the existence of the alleged Arrangement. However, it also submitted that, even if any such understanding or agreement had been reached by its employees, knowledge of it could not be attributed to Trafigura itself. The law will not permit a corporate party to be fixed with knowledge of a fraudulent enterprise hatched by its employees where the activity would so obviously have been fraudulent and contrary to the interests of the company. For this reason, Trafigura argued that no knowledge of the frauds could possibly be attributed to it so as to defeat its claims, as Mr Gupta and the Corporate Defendants alleged.

The Master Contracts

There were nine Master Contracts, made between 6 October 2021 and 17 August 2022, which were relevant to this claim. Each Master Contract was made between Trafigura and one of the Corporate Defendants. The Master Contracts were materially the same as one another. Under each Master Contract, Trafigura (defined as the Buyer) agreed to purchase, and the relevant Corporate Defendant (defined as the Seller) agreed to deliver, a specified total quantity of LME Grade Nickel on CIF terms, with that Nickel to be shipped in "lots" each delivery month.

As to pricing, the Master Contracts provided for 85% or 90% of the provisional invoice to be paid against a full set of BLs, a seller's invoice, certificate of analysis, and an insurance certificate. The Master Contracts then referred to the possibility that there would be a buy back by mutual agreement (but not as a matter of obligation). The Master Contracts also incorporated a set of general terms and conditions (GTCs).

The Commercial Court decision

Existence of Arrangement

On the documentary and witness evidence, the Court found that the Arrangement on which Mr Gupta relied had never existed. Although that meant the Court did not have to decide the issue of whether knowledge of that alleged Arrangement should be attributed to Trafigura, in deference to the submissions that had been made during the trial it addressed the question. In doing so, the Court decided that, even if such an Arrangement had existed, Trafigura would not have been a party to it because it was manifestly contrary to Trafigura’s commercial interests. The Arrangement would have involved Trafigura paying enormous sums of money for worthless goods and fraudulent documents, and in defrauding its bankers by doing so. The Court would not accept that the question of what material was in the containers was irrelevant to Trafigura.

The Court further accepted Trafigura’s position that, even if the relevant senior employees had agreed to the Arrangement as Mr Gupta alleged, they would not have been acting honestly and so they could never have had actual authority to conclude the Arrangement on behalf of Trafigura. That finding was based on the fact that English law will not permit an agent to have actual authority to bind its principal to enter into a fraudulent arrangement.

Additionally, as the alleged Arrangement would have been clearly contrary to Trafigura's interests (indeed its basic effect was to cause Trafigura to pay very large sums of money for worthless cargoes), Mr Gupta must have known that neither of the relevant employees could have had actual authority to agree to it on Trafigura's behalf; as a result, the law provides that they could not have had apparent authority, either.

Fraudulent misrepresentation

At the time that the parties had negotiated and agreed contracts for the supply of Nickel, each Corporate Defendant was to be taken as having represented that it honestly intended to deliver that commodity and did not intend to substitute lower grade or worthless material instead. The existence of such an implied representation was found to be a matter that “goes without saying”. Borrowing a phrase from an earlier decision, the Court called such representations the “sub-stratum” to the Contracts. As a result, if the Corporate Defendants never intended to deliver Nickel at all, they had made fraudulent misrepresentations when entering into the Contracts with Trafigura.

Accordingly, the Court found that Trafigura had been induced to enter the Master Contracts by the relevant Corporate Defendants’ representations that they honestly intended to perform their obligations to deliver Nickel. Those representations were false, dishonestly made, and induced Trafigura to contract. It had, therefore, established a claim for fraudulent misrepresentation. It also had a claim at common law in deceit for damages against each Corporate Defendant. Mr Gupta was additionally liable in deceit as a joint tortfeasor.

Rescission

The Defendants had argued that Trafigura was not entitled to rescind the Main Trades, because that would have entailed only a partial recission of the totality of the relevant contracts because Trafigura had disposed of some of the lower grade material delivered to it and, in the case of certain material that remained in Trafigura’s possession, the relevant Defendant seller was liquidated or dissolved.

The Court disagreed, finding that Trafigura was entitled to rescind the Main Trades because of the fraudulent misrepresentations affecting them. The Court found that a fraudster cannot be heard to complain that counter-restitution has been made impossible by its own actions. Further, it remained possible to return material to the Defendant that was in liquidation. In any event, the material that Trafigura retained was worthless so that there was nothing in monetary terms for Trafigura to credit against its claims for restitution.

The Court accordingly decided that the Main Trades could be individually rescinded without Trafigura needing to rescind either the Master Contracts or the other trades. As a matter of construction, the Master Contracts were all severable contracts, which could be divided into individual instalments (i.e., the separate trades) for which they provided. In deciding that the Master Contracts were divisible contracts, the Court noted that the Trades were not for a lump sum price; they were individually priced per tonne depending on the LME market price was at the relevant times. Similarly, delivery took place in lots that amounted to severable instalments. Each divisible contract could be rescinded and, the Court found, there was accordingly no unfairness to the Defendants in rescission being limited to those transactions.

The Court further decided that Trafigura had not affirmed the Main Trades, which would otherwise have prevented their rescission. On the evidence, Trafigura did not have the requisite knowledge of the true facts pertaining to the fraud and so could not possibly have affirmed them in knowledge of those facts. Trafigura was accordingly able to rescind the 91 Main Trades, subject to accounting for any financial benefits it had received from them.

GTCs

The Court rejected arguments that the GTCs excluded Trafigura’s claims. In particular, the Court remarked that the law had for a long time been clear about the fact that a party could not rely on an exclusion or limitation clause in respect of liability for its own fraud.

Additionally, contractual quality provisions could not apply to claims flowing from a deliberate failure to deliver any of the product contracted for at all, still less claims that the Master Contracts were induced by fraud. The Court also rejected an argument that payment for the goods constituted a waiver in respect of quality deficiencies in the delivered metal; there could be no such waiver where the material delivered was not at all the Nickel contracted for in the first place.

Unlawful means conspiracy

The Court found that the defendants were also liable in tort for unlawful means conspiracy, which exists where there is a combination between the defendant and other parties with the intention to injure the claimant through unlawful acts, and which does in fact cause the claimant loss.

Relief

If the Main Trades were rescinded, Trafigura had a personal restitutionary claim against each relevant Seller for the return of the purchase monies paid to that particular Seller, provided that Trafigura accounted for the benefits received under those trades from the particular Seller.

The net sum was US$489,786,311.72. Trafigura was entitled to trace into the fruits of that sum in the hands of the Defendants, or into traceable proceeds (or credits that represented those proceeds).

In addition, Trafigura was entitled to substantial damages, which included sums that Trafigura had spent, and to which it had been exposed, in legal proceedings brought by its own purchasers. Further proceedings, referred to as phase 2, would be required in respect of the tracing claims.

Comment

In what was a very high-profile dispute revolving round frauds on a grand scale, Trafigura and its employees were fully vindicated before the Commercial Court.

The Court found Mr Oikonomou to be “wholly honest” and his evidence was “accepted without qualification”. On the other hand, the Court found Mr Gupta not to be an honest witness and he “could not rely on his oral or written evidence in respect of any of the material issues” to be decided. While this underlines the importance of factual and documentary evidence to the outcome, the decision is an admirably clear explanation of important legal principles surrounding fraud. It is important that those engaged in commodities trading and finance are aware of those principles, as well as the risks inherent in certain kinds of trading and financing structures that this case, like others before it, illustrates so well.

In summary, the Court decisively held that:

• A party in Trafigura’s position cannot be taken to have known of, and acquiesced in, an arrangement that would have been very obviously against its commercial interests and would have involved it in frauds affecting itself and its banks by paying vast sums for goods and false documents having little to no value.

• A party is entitled to rescind a contract that is vitiated by fraudulent misrepresentation, even if it cannot give full counter-restitution of the value of that contract to the misrepresenting party.

• Where a contract is severable, the innocent party to a fraudulent misrepresentation may rescind divisible parts of that contract.

• Although the Court found that Trafigura had not affirmed any of the contracts that it sought to rescind, the case is a useful reminder that it is possible for an innocent party to affirm a contract that it could otherwise rescind for fraud. However, an affirmation will only arise if the innocent party has full knowledge of all the facts relating to the extent and nature of the fraud.

• The Court will readily grant remedies across multiple causes of action where the evidence supports those remedies. Here, Trafigura succeeded in its claims based on recission for fraudulent misrepresentation, deceit, and unlawful means conspiracy.

The facts of this case reveal multiple red flags that emerged over time and that have commonality with previous fraud cases, including those involving circular nickel trades. While, of course, not every trade structured as a circular transaction will involve fraud, anyone engaged in the trade and finance of high value commodities is well advised to study the facts of this decision closely.