Radiant World sues Glencore for $2 billion

Radiant World and Sapphire Minmetals have sued Swiss miner and commodities trader Glencore (LSE: GLEN) in Singapore, seeking $2 billion (C$2.8 billion) in damages.

Sapphire Minmetals, which used to be part of Radiant World, is joining the Singapore-based iron ore trader in the claim, chairman Rakesh Sethi told Bloomberg. The companies allege they suffered more than $2 billion in losses because of Glencore’s actions.

Radiant World and Sapphire are also subject to a London court order freezing up to $499 million in assets after a Jefferies-managed fund alleged they used fake iron ore invoices as part of a scheme to defraud it, Bloomberg reported Tuesday. 

Glencore said Tuesday it had confirmed evidence that Radiant World and associated companies sent financial institutions falsified invoices and contracts as well as fabricated emails purportedly from Glencore employees.

The company said it had incurred losses and been exposed to risks through the dealings and would take appropriate action. It called Radiant World and Sapphire’s claims meritless and said it would contest them vigorously.

Radiant World has denied wrongdoing and previously called allegations that it supplied invalid invoices to raise financing “inaccurate and unsubstantiated.”

Legal pressure

Radiant World also faces Singapore lawsuits from trade-finance platform Incomlend and a unit of Japan’s Mizuho Financial Group. Incomlend is seeking more than $34 million over allegedly invalid invoices used to secure financing, while Mizuho has sought an injunction against Radiant World.

Mizuho provided about $100 million in credit to Radiant World in June secured by invoices purporting to cover iron ore sales to Glencore. Glencore later told the bank it didn’t recognize the invoices, according to documents reviewed by Reuters.

The U.S. Department of Justice and the Commodity Futures Trading Commission are also examining transactions involving Radiant World and its creditors. Singapore police are investigating the trader and raided office premises in August, questioning some employees.

Glencore, previously a major counterparty to Radiant World, has taken a provision of about $480 million against its exposure to the trader and related companies. The amount effectively covers its outstanding net exposure, Bloomberg reported. 

Staff exits

The mounting legal and financial pressure has been accompanied by staff departures. Radiant World has lost almost half its iron ore traders in China and Singapore, while employees have also departed its London and Geneva offices, Bloomberg reported. Some were dismissed and others resigned.

The reductions are the second round since July, when lenders began withdrawing credit lines and major commodity traders distanced themselves from Radiant World.

Among the departures is Leon Jin, a veteran trader who headed Radiant World’s iron ore business in China. Jin left this month after the company encountered difficulties carrying out daily operations, according to Bloomberg.

Base metals traders Francois-Henri Audibert and Kelvin Li are also leaving, while some staff remain at the company’s metals unit, which operated largely independently from the troubled iron ore division.

Sapphire Minmetals has cut two operations employees, one in Shanghai and another in Singapore, while retaining a small group of traders in Beijing to manage its remaining iron ore business. The company is putting new trading business on hold while it deals with the legal disputes, Sethi told Bloomberg.