Dealer buys $ 36 million buyer and gets painted rocks instead

Source: Sinan Borovali / KYB Law Firm

Commodity commodities Mercuria Energy Group Ltd. entered into an agreement last summer to buy $ 36 million from a Turkish supplier. But when the cargo arrived in China, all the containers were found full of painted rocks.

The saga unfolds like a gangland thriller, and the Swiss trading house said it was the victim of cargo fraud. Before the journey from a port near Istanbul to China even began, about 6,000 tons of leaf copper were converted into more than 300 containers with serrated paving stones, spray-painted to look like the semi-refined metal.

The bizarre case highlights the vulnerability of commodity traders to fraud, even if there are security and inspection controls. In 2014 and 2015, Mercuria made provision to cover potential losses after metal was seized by authorities in a warehouse in Qingdao’s Chinese port as part of fraud investigation.

Turkish police have arrested 13 people in connection with the faux buyer schedule. Mercuria, one of the five largest independent oil traders in the world, wants redress in both the Turkish courts and a British arbitration case against the copper supplier, Bietsan. It also lodged a formal criminal complaint with the Turkish police and prosecutors over the replacement of cargo and insurance fraud, leaving the authorities to determine who was responsible.

Several calls to Bietsan’s offices in Tekirdag went unanswered.

“Suspects have been brought under surveillance who are suspected of being involved in the various parts of this organized crime against Mercuria,” the Geneva-based Mercuria said in a written statement thanking the Department of Financial Crimes in Istanbul.

The story is composed of legal documents, interviews and local media reports.

Buyer called

Last June, Mercuria agreed to buy from Bietsan, a Turkish supplier with which it had previously done business, according to Sinan Borovali, the lawyer of the trading house in Turkey. It appears that buyer was initially loaded into the first cargo containers before being inspected by an inspection company. Stamps used to prevent fraud were then affixed to the containers.

But under the guise of darkness, it is alleged that the containers were opened and the buyer was replaced with paving, Borovali of the Istanbul law firm KYB said in an interview. The fraudsters switched between fake and real container seals in an attempt to prevent detection.

When ships left the Marport terminal in the port of Ambarli every few days, the same thing happened: the buyer was secretly unloaded at night and replaced with painted rocks. “That’s how they did it,” Borovali said.

With the vessels at sea, Mercuria paid $ 36 million in five installments with the last payment on August 20, 2020, according to documents provided by the commodity trader to Turkish investigators. The fraud was first discovered until the ships began arriving in the Chinese port of Lianyungang later this month. By then, all eight vessels were on their way to China.

Organized crime

“There was a petition of criminal investigation by the buyer against the seller and two intermediaries,” Turkish police said in a statement. “It has been established that the incident was the result of fraud in an organized manner.”

Normally, in such cases of delivery, a trading house can file a claim against the insurance policy of a cargo. But Mercuria found that only one of the seven contracts the Turkish company used to insure the cargo was real. The rest was forged.

The 13 suspected fraudsters were arrested this month during a series of police attacks. Some have since been allowed to leave their custody and be placed under house arrest, according to local news reports. More hearings on the case are expected this week.