An employee of Trafigura, the world's second-largest metals trader and third-largest oil trader, was arrested by Chinese police as part of an investigation into an alleged $32 million gasoline trade fraud.
Tian Meng, 39, who works at Trafigura's oil marketing team in Beijing, has been held without charge in the northern city of Cangzhou since August, three sources with direct knowledge of the situation said.
Commodity financing deals in China are already under the spotlight
after a billion-dollar scandal at Qingdao Port, where a private Chinese
trading firm has been accused of duplicating warehouse certificates to
secure bank loans. Police in China can arrest suspects and detain them for up to seven months without charge, according to the Chinese law. While Tian could not be reached for comment, a spokeswoman for Trafigura declined to comment.
The probe into Tian was launched after private Chinese trader Qingdao United Energy (QUE) filed a complaint to police in early August, alleging it had lost $32 million via trade financing deals arranged without its knowledge between Tian and local trader Zhang Wei, according to two sources with direct knowledge of the matter.
According to a warrant seen by Reuters, Zhang was arrested in May and he could not be reached for comment. A spokesman for the Cangzhou police bureau declined to comment when asked to confirm the investigation into Tian and Zhang.
A senior Trafigura source said Zhang, who had been trading derivatives with Trafigura since 2011 using collateral and credit backed by a local-government-backed firm, had accumulated losses of $32 million by late 2013 and agreed to a financing scheme with Tian and his Singapore-based gasoline team to settle the losses.
Zhang bought 700,000 barrels of gasoline from Trafigura at market price using letters of credit issued by QUE and then sold them back to Trafigura at a discount of $32 million, two official sources with direct knowledge of the investigations said.
The founder of QUE, Li Yixing, told Reuters he was not aware of the loss-covering agreement made by Zhang, who was a shareholder in his company but was not authorized to enter into such deals.
The senior Trafigura source said Tian believed Zhang was the authorized agent of QUE, adding that Zhang had represented other companies in previous transactions without problems.
