Mauritian regulators examine bank in wake of Trafigura nickel fraud

Mauritian regulators are examining a small bank whose majority owner has links to the alleged perpetrator of the $577mn nickel scam revealed this month by commodities trader Trafigura.

Silver Bank, a lender with MRs11.4bn ($248mn) in assets, has the same controlling shareholder as TMT Metals, one of the companies Trafigura accuses of a “systematic fraud” involving fake nickel cargoes.

Documents seen by the Financial Times also show that a director at Silver Bank and a director at its sole shareholder both previously worked for Prateek Gupta, the Dubai-based metals trader at the centre of the alleged fraud.

The Bank of Mauritius has confirmed that “the counterparty” involved in the alleged fraud against Trafigura is “linked to one of the ultimate beneficial owners of Silver Bank”. It told the Financial Times it was “closely examining and scrutinising all affairs of Silver Bank” in the wake of Trafigura obtaining a $625mn freezing order against Gupta’s business empire.

“The Bank of Mauritius will take any necessary regulatory action it may deem appropriate in light of its current examination,” it said.

While Trafigura has claimed TMT is “apparently controlled” by Gupta, Silver Bank has denied that the accused fraudster is one of its shareholders. The Mauritius-based lender also told the FT it “has no direct or indirect exposure to Mr Gupta or linked companies and individuals”.

“We strongly believe that no outcome of announced dispute might have any impact on the bank’s financial position,” Silver Bank added.

The lender was previously known as BanyanTree Bank before it collapsed into conservatorship in 2020, wiping out the stakes of shareholders including Sanjeev Gupta, another metals magnate whose own business empire is under criminal investigation for suspected fraud.

Cayman Islands investment firm Silver Star SPC acquired the lender in October 2021, renamed it Silver Bank and injected $40mn of capital to bolster its balance sheet. Silver Bank has not disclosed the identities of the ultimate owners of Silver Star.

Cayman Islands records show that one of Silver Star’s two directors is Smrity Sudan, who according to LinkedIn was an in-house lawyer for Prateek Gupta’s UD Trading Group. Sudan did not respond to requests for comment.

Silver Star is also the majority shareholder of TMT Metals, which is directly implicated in the Trafigura scandal and counts Prateek Gupta as a minority shareholder. While TMT’s latest accounts state that Silver Star “has no controlling party”, in previous accounts when Prateek Gupta was majority shareholder it was described as “a related party by virtue of significant influence”.

Alexander Bello, a director of both Silver Bank and the Mauritian holding company through which Silver Star made its investment, was also formerly involved in TMT Metals.

A document that TMT sent to prospective lenders in early 2021 lists Bello as a member of the trading firm’s “leadership and advisory board”, which was headed by Prateek Gupta and approved the metals trading firm’s “budgets and risk limits”.

However, Bello told the FT that since the “beginning of 2020” he had not been a member of TMT’s advisory board.

“My role at that time was merely as an adviser for ‘new opportunities’, which never materialised, and I was never involved in any whatsoever executive/board decisions of that company,” he said in a LinkedIn message.

He added that his role on Silver Bank’s board was “not linked in any way” to Prateek Gupta.

Bello is the managing partner of CS Global Partners, whose website states that it “endorses the citizenship by investment programmes of Dominica, St Kitts and Nevis, and St Lucia”.

Records show that Prateek Gupta and his wife both obtained Dominican passports in 2018 through the Caribbean island nation’s citizenship by investment programme.

Deloitte has given Silver Bank qualified audits for the past three years, because it was “unable to obtain sufficient appropriate audit evidence” around “professional fees from related parties”.

Silver Bank told the FT this was because of an “irregularity in the approval process” for an “introducer agreement” under its previous ownership in 2019, when the lender was still known as BanyanTree Bank.

The Bank of Mauritius put BanyanTree Bank into conservatorship in April 2020 after it was hit with a wave of margin calls across its highly leveraged investment portfolio.

Its accounts for that year note that a “fire-sale of securities resulted in irreversible losses” and that there had been “visible deterioration” in its loan book, which included a related party loan becoming “fully impaired”.

Sanjeev Gupta held a nearly 10 per cent stake in the bank during this period. The metals magnate was at the same time the sole shareholder of British lender Wyelands Bank, which in March 2021 the UK’s Prudential Regulation Authority ordered to repay customer deposits amid rising concerns over its financial position. The PRA also referred Wyelands to the National Crime Agency and Serious Fraud Office, after probing its “connected lending” to Gupta’s businesses.

Sanjeev Gupta’s metals trading company has previously traded with Prateek Gupta’s businesses, financing some of these transactions through Wyelands Bank. Sanjeev Gupta was also previously a shareholder in Prateek Gupta’s Indian company Ushdev International.

Sanjeev Gupta’s GFG Alliance declined to comment on his stake in BanyanTree Bank. GFG last week told the FT it “has for years had no business or relationship with Prateek Gupta or Ushdev and is in no way connected to any of the activities Trafigura’s announcement referenced”.