Prateek Gupta: The Big Indian Defaulter behind a $500 Million International Commodities Fraud
Updated at 7pm on 1 March 2023 to add response from Mr Gupta's PR agency...

We take great pride in the fact that many successful Indians are occupying corner offices at the world’s largest and most powerful corporate houses and every action of theirs makes news in India. The flip side is that people of Indian origin will also hit the headlines for zip and enterprise of another kind—for gigantic fraud, running mega scams and even market manipulation. These stories are buried in tiny reports and rarely make it to front pages or television debates. 
 
For instance, how many of us remember that the ‘Flash Crash’ of 6 May 2010, which wiped out a trillion dollars in five minutes, was the handiwork of a young, reclusive Indian called Navinder Singh Sarao, trading alone out of west London. Those who want to know the fascinating details should read Flash Crash by Liam Vaughan who describes the global manhunt to catch Sarao, characterised as a ‘trading savant’. 
 
Another Indian who is making news abroad, but doesn’t figure on our media channels, is Prateek Gupta of Ushdev International Ltd, despite his history of cheating several banks in India. He has recently acquired the dubious cred of having cheated Trafigura, a global commodities trading giant, of a whopping US$577mn (million) in a nickel deal. This is when his admitted dues to Indian banks were over Rs3,500 crore and total liabilities around Rs4,205 crore. He was being investigated by the central bureau of investigation (CBI). 
 
So what is Prateek Gupta’s story? Let’s start with why he is in the news today. 
 
Trafigura Scammed of US$500 Million
On 9th February, the global commodity trading giant Trafigura group Pte issued a press release which said it had “discovered a systematic fraud committed by a group of companies” to the tune of US$577mn by companies controlled by Prateek Gupta, in connection with a deal to purchase about 25,000 tonnes of ‘containerised nickel’. Trafigura had entered into a ‘transit finance’ deal, or what would be called a ready-forward deal, where it would buy nickel from companies connected to Mr Gupta and sell them back to the same companies in future at a higher price that covers interest cost. 
 
Sometime after October 2022, Trafigura inspected eight shipping containers and found that they did not contain nickel or even nickel alloy. As it expanded its inspection to a few hundred containers (out of over 1,100 covered by the deal), it discovered more of the same. Instead of nickel or nickel alloy, whose prices have been shooting up since the Russia-Ukraine conflict, the containers contained carbon steel, whose value is a fraction that of nickel.
 
The Trafigura group, which operates across commodity businesses, employs 12,000 people across 156 countries, rushed to court in February and obtained a ‘worldwide freezing order’ of US$625mn against Mr Gupta and his companies, led by TMT Metals Holdings Ltd based in London. The London high court order restrained individuals and businesses from dealing with Mr Gupta’s assets anywhere in the world. It is open to challenge by the Gupta group and the hearings will commence soon. Reports in the international media suggest that Trafigura has had a legitimate business relationship with Mr Gupta’s companies since 2015.
 
Prior to this, Mr Gupta has inflicted even greater losses on Indian public sector banks (PSBs). It would seem that he was building his international commodity businesses through money diverted from the Indian company. He bought TMT Metals AG, a trading firm, in 2016. He also has companies in Singapore, Malaysia and Switzerland. 
The sequence of events is interesting. 
 
Indian Shenanigans 
Ushdev International was founded by late Vijay Gupta who started operation as commission agent and later set up a power generating and steel trading company. The promoters have 54% stake and the rest is publicly held. The 43-year-old Prateek Gupta has been managing director (MD) after his father’s demise in 2009. His mother, Suman Gupta, who is a citizen of the Republic of Dominica (a tiny Caribbean island), became the chairperson, while his younger brother was appointed vice-chairman. The company was apparently profitable until FY15-16 when it reported Rs52 crore profit. That was the same year it began a business relationship with Trafigura. 
 
Interestingly, the very next year, FY16-17, it reported a significant, Rs229 crore, loss. Things went downhill for the Indian business very rapidly and it figured in the Reserve Bank of India’s (RBI)  second list of top-30 defaulters (after the infamous dirty dozen of the first list) and was dragged into bankruptcy proceedings soon after the Insolvency and Bankruptcy Act was passed. 
 
Typically, there is no investigation into how PSBs extended such huge loans to Prateek Gupta backed by empty personal guarantees which have turned out to be the norm in all wilful default cases. In Ushdev’s case, I know that at least one public sector lending institution that had shown him the door, making this a fit case to examine bankers’ collusion. So what had raised a red-flag for this banker?
 
He says he approached the institution for a credit facility to back his steel exports. He had good financials and impeccable references, but the banker had doubts about his value proposition for overseas buyers to use him. He was still sanctioned a US$10mn line of credit secured by a property in Mumbai and corporate guarantee as well as personal guarantee. Things went well for nine months, but then the lender began to get worried about ‘too many high seas sales’ and dealings with very ‘unusual parties’, not to mention the structuring of the documents. Essentially, says the banker, Mr Gupta’s story did not ring true. Meanwhile, Mr Gupta’s borrowings from other Indian banks were going well and he lobbied for clean credit with no guarantees. The lender refused and, fortunately for them, Mr Gupta paid they back when the loans were due. While this lender decided not to do business with Ushdev anymore, a host of PSBs, led by State Bank of India (SBI), continued to lend. 
 
Bank Losses in India
In 2017, when SBI filed insolvency proceedings, Ushdev owed over Rs3,500 crore to secured lenders and a few hundred crore rupees to others. SBI approached CBI which, finally, registered a case against Prateek Gupta and his mother in 2022 after conducting raids at multiple locations. The Guptas were accused of causing a loss of Rs1,438 crore to SBI and four others by diverting funds through loans and advances to related entities, manipulating accounts and showing false sales to dormant overseas entities.
 
Such was the state of affairs that the insolvency process attracted only one serious bidder, who was also rumoured to be a front for the promoters. This bidder, Taguda Pte Ltd of Singapore, also offered a meagre Rs200 crore that too payable in four equal tranches in 90 days. The bid was initially rejected by national company law tribunal (NCLT), Mumbai, but this was contested by employees and other financial creditors. They pointed out that the measly Rs200 crore was better than the liquidation value of Rs66 crore-Rs67 crore estimated by two valuers and would allow employees to keep their jobs if the company survived. In February 2022, NCLT approved Taguda’s ‘revival’ plan by paying just Rs227 crore—a little higher than the original offer. At that time, the admitted liabilities of Ushdev were reported to be Rs4,205 crore.
 
While Indian banks lost heavily, some international bankers, such as the Citigroup, continued to do business with Mr Gupta’s international companies --right until the end of October 2022, according to Trafigura’s court submissions. Why did international bankers and companies such as Trafigura ignore the big bank default in India? Was it because Mr Gupta was able to offer guarantees or securities through money siphoned off from the Indian businesses? What does this say about the state of our investigation machinery? 
 
As with Winsome/Suraj Diamonds or with Pramod Mittal’s companies (Ispat Industries), the real truth is likely to emerge from the court proceedings in London, while our own investigators draw a blank. What is worse, any financial recovery that happens due to the global freeze and other actions will also not find their way back to India. And, yet, the finance ministry aggressively insists that recovery action continue and defaulters will not be let off, despite the mega loan write-offs over the past five to seven years. 

UPDATE:
A public relations (PR) agency for Mr Gupta has written to say that the allegations against him in connection with Trafigura are only 'alleged and have not been tested, let alone proven in court'.
 
We have already stated that Mr Gupta can challenge the high court order.
 
 
Comments
kidan2010
1 year ago
The 2015 profit of 58 million should also be fake. Just because the company thereafter declared a huge loss shouldn’t be stated by the narrator unless they are sure of the genuineness.
This fraudster has been playing around with figures. Profit must also be fake.

Amazing how they get these huge bank loans while the common man is just stiffed by the bank staffers.
baalkee
1 year ago
With such a high hair cut in most big defaulting Borrwers, nay cheats, why no heads toll in Indian Banks?
Is IBC meant for facilitating bankers to bail out?
Thariyan Tharayil
1 year ago
Indian banks are very diligent in looting the poorest of the poor indians in the name of average minimum balance requirement.
chn.bala
1 year ago
Just goes to prove that our trader's brains have the built-in DNA for fraud. Trafigura are no angels, given their record in dumping refinery sludge in Africa, but still I cannot help feeling sorry for them, in this instance.
Array
Free Helpline
Legal Credit
Feedback