Marex Spectron warned by executive of fraud risk -lawsuit documents
* Executive concerned about endorsed warehouse receipts
* Marex said reassured by Glencore-owned warehouse
By Eric Onstad
LONDON, Jan 17 (Reuters) - Commodities broker Marex Spectron
was warned by one of its executives about the risk of fraud
before it finalised a metals financing deal with French bank
Natixis that triggered a $32 million lawsuit by the
lender, court documents seen by Reuters show.
Natixis filed the lawsuit against Marex in May 2017 after
the bank said warehouse ownership receipts for nickel provided
by Marex had turned out to be fake. Natixis holds Marex
responsible for not identifying the fraud before the financing
deal was completed.
Court proceedings are due to start next week in London's
The receipts were part of a repurchase agreement, arranged
by Marex, between Natixis and a Hong Kong firm. None of the
parties in the case have disputed that the receipts were
fraudulent but no accusation has been made as to who faked them.
Marex has rejected the lawsuit and issued a claim against
Glencore unit Access World, which stored the metal.
Marex said it had been diligent in verifying the receipts and
had received assurances from Access World about their validity.
According to court documents filed in December and seen by
Reuters, concerns were aired by one of Marex's executives when
Marex was in negotiations with Hong Kong firm Come Harvest
Holdings Ltd (CHH), which allegedly said it would supply nickel
ownership documents in exchange for financing from Natixis.
Marex and Natixis declined to comment. Reuters was unable to
contact CHH for comment. CHH is not a party to the lawsuit.
The documents by Marex's insurers, who rejected a claim for
indemnity from Marex, stated that concern about potential fraud
was raised within the brokerage in November 2016 by Kevin Nutt,
chief operating officer of metals at Marex, and Judi Ferrari, a
The concern among Marex staff revolved around whether it was
safe to accept warehouse receipts that had been passed on from
one holder of the nickel to another rather than demanding
original receipts, the court documents said.
"Both Mr Nutt and Ms Judi Ferrari ... expressed concern that
there was a risk of fraud on the warehouse receipts and the
underlying nickel," the documents from Marex's insurers said.
"Mr Nutt expressed concern that those warehouse receipts
were not in the name of CHH."
Reuters attempted to contact Nutt via Marex, but a Marex
spokesperson said he declined to comment. Reuters was unable to
contact Ferrari, who no longer works at Marex.
Natixis has also sued warehousing company Access World after
it was discovered that the warehouse receipts were fake. Access
World has denied that it validated all of the warehouse receipts
provided by Marex.
Glencore declined to comment.
In its defence, Marex said Nutt subsequently contacted
Access World, where the nickel was stored. Access World said
there would be nothing unusual about the endorsement of
warehouse receipts, according to the documents.
"Despite the initial concerns ... Mr Nutt was reassured
following a telephone conversation and an email exchange (with
Access World)," Marex lawyers said in the court documents.
The practice of using metal as collateral in warehouse repo
deals has come under increasing scrutiny since a $3 billion
fraud four years ago at Qingdao port in China, which led to a
$440 million fine for the firm involved, Dezheng Resources, and
a 23-year jail sentence for its chairman.
(Reporting by Eric Onstad; Editing by Veronica Brown and Dale
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