Trafigura checked traders didn't collude in Gupta fraud case - document

By Eric Onstad, Polina Devitt and Pratima Desai

LONDON (Reuters) - Trafigura looked into whether staff colluded with Indian businessman Prateek Gupta, whom it accuses of substituting nickel with low-value metals, but was satisfied by their denials, a court document shows.

Geneva-based commodity trader Trafigura filed a lawsuit against Gupta in February, alleging seven companies that it said were controlled by him carried out a systematic fraud involving nickel cargoes.

Gupta has said in his defence that Trafigura staff devised the scheme at the centre of the case.

Hundreds of pages of new documents have been released in connection with a two-day London court hearing that started on Tuesday in which Gupta asked a judge to lift a freezing order on his personal and business assets.

The documents include WhatsApp messages and emails that Gupta says show Trafigura staff, including head of nickel trading Sokratis Oikonomou, devised a scheme to trade alloys and scrap in a transit financing operation and pretend they were nickel.

Many of the communications involved Indian-based trader Harshdeep Bhatia, who in December 2022 told Gupta in a WhatsApp message: "We all need to get out of it ASAP as consequences are beyond words".

Reuters was unable to contact Oikonomou and Bhatia for comment, both of whom no longer work for Trafigura.

"Certain WhatsApp exchanges between Mr Gupta and Mr Bhatia suggested a lack of the professional detachment which one might expect and Trafigura was therefore concerned about the possibility of collusion between them," a document submitted to the court by Trafigura said.

"They (WhatsApp messages) provide no support at all for the proposition that Mr Oikonomou knew about the fraud. In relation to Mr Bhatia, they do not justify a level of suspicion beyond that which was expressly canvassed in the evidence," it added.

"Both individuals have now been specifically asked about them and deny any such allegation."

In a witness statement, Bhatia said he was surprised when he found out that a cargo inspection in November 2022 found low-value carbon steel instead of nickel.

"I remember feeling complete shock and disbelief," he said in the document.

"I had never expected that the containers would contain something other than high quality nickel."

Oikonomou in his witness statement disparaged the idea he would participate in such a scheme.

"I was insulted by the suggestion that I would sacrifice my integrity and jeopardise my career to devise and propose such a plan."

Nathan Pillow, a lawyer representing Trafigura, told the London court it was laughable that the major commodity trading company would come up with the fraud.

"It's an utterly preposterous idea that Trafigura would knowingly hand over half a billion dollars for nothing," he said.

"We're in an Alice in Wonderland situation here."

(Reporting by Eric Onstad; Editing by Veronica Brown and Mark Potter)