ANZ suffered 'substantial losses' in alleged nickel receipt scam

[SYDNEY] Australia & New Zealand Banking Group Ltd told a US court that its commodities trading arm suffered "substantial losses" after it discovered that receipts for metal held in Glencore Plc's Access World warehouses are probably fake.

When ANZ looked into selling the nickel, it discovered 83 out of 84 receipts it held were likely forgeries, the Australian lender said in a June 6 petition filed in a US court in San Francisco.

It's part of a request for information the bank could use in lawsuits in other jurisdictions. ANZ has hired lawyers in the US, Hong Kong and Singapore to attempt to recover its losses and pursue the alleged fraudsters, ANZ said.

The case follows Access World's January warning to customers that it found forged warehouse receipts circulating in the market. The announcement sent shock waves through the commodities trading industry by reawakening concerns about the risk of fraud after a metal financing scam was uncovered in the Chinese port of Qingdao in 2014.

The fallout from Access World's discovery has spawned a number of lawsuits around the world. Earlier in June, Natixis SA sued broker Marex Financial Ltd in London after losing about US$32 million on a sale-and-repurchase agreement that the French bank said involved forged receipts for the storage of nickel used as collateral, according to documents from the case. Marex brokered the deal on behalf of its client, Come Harvest Holdings Ltd.

Melbourne-based ANZ said in the filing that in December 2015 it entered an agreement to purchase a substantial quantity of nickel from London-based brokerage ED&F Man Capital Markets Ltd, a unit of ED&F Man Group.

ED&F had in turn bought nickel from two Hong Kong companies: Come Harvest Holdings Ltd and Mega Wealth International Trading Ltd. Those transactions had repurchase agreements attached.

An ANZ spokesman declined to comment, while a spokesman for Glencore wasn't immediately available for comment.

"ED&F is not involved in this legal action and has no further comment to make," a spokeswoman for ED&F Man Capital Markets said by email. Nobody replied to an email sent to an address on Come Harvest's website while calls to a phone number didn't connect. Nobody answered a call to a phone number given on Mega Wealth's annual return.

At all times, the metal remained in warehouses in Singapore, Malaysia and South Korea and possession was transferred by the physical delivery of receipts. Between April and September 2016, Singapore-based Access World issued 84 receipts, 83 of which were to Straits (Singapore) Pte, a Singapore brokerage facilitation company that's a unit of Straits Financial Group, wholly-owned by CWT Ltd. The receipts were then delivered to Come Harvest and Mega Wealth and subsequently to ED&F and then to ANZ.

A spokesman for CWT and Straits wasn't immediately available for comment.

In January 2017, when ANZ began preparing to sell the nickel after ED&F decided not to repurchase any of it, the bank was informed by the warehouse operator that it had already received authenticated receipts from other parties.

"The unmistakable inference therefore was that the receipts which ANZCT possessed were not genuine," ANZ said in the filing. The bank has "no reason to suspect" that ED&F was involved in any fraudulent activity, believing instead that "those forgeries were probably introduced earlier in the chain.''

Seeking Subpoenas

ANZ didn't put a monetary figure on the cost to its business in the filing, beyond saying its commodity trading operation suffered "substantial losses". As part of its investigations, ANZ discovered remittances related to the nickel transactions made by Come Harvest and Mega Wealth to various individuals, including some who live in the US, the bank said in the filing. The bank said it believes these parties will have "highly relevant" information, and the filing to the North Californian court is an attempt to subpoena witnesses who reside in the state.

The Australian lender said in the filing that it's also seeking pre-suit discovery in Hong Kong and Singapore to uncover more facts relating to the alleged fraud.

Peter Grauer, the chairman of Bloomberg LP, is a senior independent non-executive director at Glencore.

BLOOMBERG