Trafigura says Gupta pilfered funds from metals fraud for his distressed firms

By Eric Onstad

LONDON (Reuters) -Commodity trader Trafigura's lawyers accused Indian businessman Prateek Gupta on Thursday of siphoning off funds from an alleged $600 million metals fraud to prop up his struggling business empire.

Geneva-based Trafigura sued Gupta over two years ago, alleging he was the architect of a scam in which he and his companies agreed to provide pure nickel but delivered steel or scrap instead.

Gupta has said that Trafigura employees devised the scheme at the centre of the case, an allegation Trafigura has repeatedly denied.

On the second day of testifying in the long-running case at a London High Court, Gupta acknowledged on Thursday that his UG Group of companies was running out of money in March 2021, partly due to problems associated with the COVID-19 pandemic.

He also agreed with Trafigura lawyer Nathan Pillow that his companies were paid about $500 million for pure nickel, but shipped containers of low-value metals.

When Pillow asked what happened to the hundreds of millions of dollars in profit, Gupta replied that part of it went to increased shipping costs.

"Where is the money? Did you siphon it off?" Pillow asked Gupta.

"You said you were running out of money by March 2021, so the operation of the Trafigura (fraud) scheme was central to the survival of your companies."

Gupta, testifying via video-link from Dubai where he lives, said: "I was not running the cash flow".

Gupta has repeatedly said during his testimony that he did not know about operational details and others were responsible.

Trading with Trafigura of shipments labelled as nickel totalled 22,500 metric tons from October 2017 to May 2019, jumping to 57,222 tons in 2020 and 69,165 tons in 2021, Gupta said in a court document.

On Wednesday, Trafigura lawyers accused Gupta of having had a history of fraudulent dealings before organising the alleged fraud with Trafigura.

Gupta acknowledged he was being investigated for fraud in India, but denied the allegations.

He has based his defence on accusing staff at Trafigura of devising a secret scheme to substitute metals to help boost Trafigura's standing in the nickel market.

He alleges that the undercover scheme was hatched in 2019 when he was asked to sharply boost nickel trading under then head nickel trader Sokratis Oikonomou.

Oikonomou strongly denied he was involved in the fraud in testimony earlier this week.

(Reporting by Eric Onstad; Editing by Emelia Sithole-Matarise)