Several significant international commodity traders, including Cargill, Louis Dreyfus, Bunge, Quadra, Xangbo, and Liberty Commodities have been named in a lawsuit brought by Russia’s Bank Trust in a court in the British Virgin Islands. The suit claims that these defendants took part in a fraud that caused more than $1 billion in losses.
The choice of Bank Trust to initiate the lawsuit in a foreign court highlights Russia’s ongoing efforts to recover funds from a banking crisis that happened several years ago. As an umbrella for the non-performing loans of Binbank, Otkritie, and Promsvyazbank, lenders who were saved by the Russian central bank in 2017, Trust seeks to benefit from the legitimacy of an international judicial system to support its case and improve the chances of recovering the sizeable sums at risk.
The significant dealers were charged by Bank Trust in the case that was submitted to the court for colluding with Russian entrepreneur Mikail Shishkhanov, who was the former owner of two sizable private lenders, Binbank and Rost Bank.
In the case, Shishkhanov is accused of conspiring with traders from the major commodity trading companies between 2013 and 2017 to hide transactions from Binbank that were meant to disburse money in breach of financial regulations.
According to Bank Trust, Binbank gave these businessmen money in the form of trade finance, which was later routed to offshore businesses affiliated with Shishkhanov through shadow transactions. The traders then used cash given by the bank through separate loans to Rost Bank to pay back the money due to Binbank under their trade financing agreements. These funds were never returned to Rost Bank after being transferred to the dealers through yet another series of shadow transactions with different other businesses.
The international traders are accused by Bank Trust of knowingly taking part in the fraudulent scheme, taking no financial risk in exchange for commissions, and hiding their true intentions by passing off their transactions as purchases and sales of commodities like grain or crude rubber.
The claim states that no products were actually shipped. The trade finance transactions between Binbank and the traders seemed to be properly settled in Binbank’s records, but it was impossible to determine how much actual asset dissipation took place as a result of these transactions.
By displaying the high credit ratings of its nominal counterparties, such as well-known trustworthy traders, rather than the credit ratings of its actual counterparties, which were offshore shell corporations, Binbank is said to have been able to distort its financial statements.
In order for Rost Bank to be able to repay money to Binbank, the Bank of Russia temporarily placed both Rost Bank and Binbank under administrative control in September 2017. As a result of having to recognize the losses it had experienced from transactions with its pertinent counterparties, Rost Bank suffered the majority of the scheme’s financial losses.
According to Bank Trust, Rost Bank’s legal successor under Russian law, it is entitled to sue Rost Bank for losses sustained.
“We are dedicated to making anyone responsible for their acts who participated in this scheme accountable. We will pursue all legal options at our disposal to seek justice for the creditors as a result of the considerable injury that this illicit action caused to Bank Trust’s clients, regular Russian citizens, said a statement from a company representative.
Cargill, Louis Dreyfus, Bunge, Quadra, Xangbo, Liberty Commodities, and Shishkanov have not responded to requests for comment as of the time of publication.
