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Bank Trust Sues Commodity Traders for Conspiring with Former Bank Owner

3 mins read

Key Takeaways:

  • PJSC National-Bank Trust has filed a lawsuit against major international traders and offshore companies linked to former owner of large private banks, Mikhail Shishkhanov.
  • The lawsuit alleges that Mr. Shishkhanov conspired with traders from international agricultural and commodity trading companies, such as Cargill, Louis Dreyfus, Bunge, Quadra, Xangbo, and Liberty Commodities, to conceal transfers from Binbank that were intended to dissipate funds in violation of financial regulations.
  • The traders appear to have deliberately concealed the true motives behind their transactions under the guise of buying and selling commodities, such as grain or crude rubber. No actual shipping of goods took place.

Bank Trust Sues Major Commodity Traders for Over $1 Billion Alleging Financial Irregularities

PJSC National-Bank Trust has filed a lawsuit against major international traders and offshore companies linked to Mikhail Shishkhanov, former owner of PJSC B&N Bank and JSC Rost Bank, alleging financial damage amounting to over $1 billion. The lawsuit, filed in a British Virgin Islands court, claims that between 2013 and 2017, Mr. Shishkhanov conspired with traders from international agricultural and commodity trading companies, such as Cargill, Louis Dreyfus, Bunge, Quadra, Xangbo, and Liberty Commodities, to conceal transfers from Binbank that were intended to dissipate funds in violation of financial regulations.

Trade Finance Transactions and Offshore Companies

According to Bank Trust, Binbank provided funds to the international traders in the form of trade finance, which the traders subsequently redirected in shadow transactions to offshore companies connected to Mr. Shishkhanov. The traders then paid back the money they owed to Binbank under their trade finance agreements using funds the bank gave them through separate loans to Rost Bank, which were moved to traders via a series of other shadow transactions with various other companies. The money given through Rost Bank was never returned to Rost Bank itself.

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Fraudulent Transactions

Bank Trust alleges that the international traders were aware of the fraudulent nature of the transactions and willingly participated in the illegal schemes, while assuming no financial risks and receiving commissions. The traders also appear to have deliberately concealed the true motives behind their transactions under the guise of buying and selling commodities, such as grain or crude rubber. In fact, according to the claim, no actual shipping of goods took place.

Manipulation of Financial Statements

The trade finance transactions between Binbank and the traders appeared to be properly settled in Binbank’s records, and the actual asset dissipation that happened through those transactions was not detectable from Binbank’s accounts. At the same time, Rost Bank gradually increased the amount of its indebtedness to Binbank but did not receive any repayments from the offshore companies to which it transferred the funds. As a result, this scheme allowed Binbank to manipulate its financial statements by displaying in its records the high credit ratings of its nominal counterparties (well-known reliable traders) instead of the credit ratings of its actual counterparties (offshore shell companies).

Seeking Justice for the Creditors

In September 2017, Binbank and Rost Bank were placed under temporary administration by the Central Bank of the Russian Federation, which had to provide funds to Rost Bank to enable the latter to return money to Binbank. As the legal successor to Rost Bank under Russian law, Bank Trust has the legal standing to claim damages incurred by Rost Bank. A spokesperson for Bank Trust stated, “We are committed to holding the individuals who took part in this scam accountable for their actions”.

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The Background of the Case

Bank Trust is the legal successor to Rost Bank and has the legal standing to claim damages incurred by Rost Bank. In September 2017, Binbank and Rost Bank were placed under temporary administration by the Central Bank of the Russian Federation, which had to provide funds to Rost Bank to enable the latter to return money to Binbank. As a result, Rost Bank incurred the main financial damage from the scheme as it had to recognize the losses it incurred from transactions with its relevant counterparties.

The Possible Impact of the Lawsuit

This lawsuit filed by Bank Trust against Cargill, Louis Dreyfus, and other major commodity traders is a significant development in the global commodity trading industry. The case is a stark reminder of the risks involved in doing business with offshore companies and the importance of conducting proper due diligence.

The potential impact of this lawsuit is far-reaching, and it could have significant consequences for the international commodity trading industry. The industry is already under scrutiny from regulatory authorities in many countries, and this lawsuit could lead to further scrutiny and regulation.

Additionally, the lawsuit could have an impact on the reputations of the accused companies. If the allegations are proven to be true, it could damage their reputations and lead to a loss of confidence from investors and customers.

Conclusion

PJSC National-Bank Trust’s lawsuit against major commodity traders Cargill, Louis Dreyfus, and others is a significant development in the global commodity trading industry. The bank claims that these traders were involved in illegal schemes to conceal transfers from Binbank that were intended to dissipate funds in violation of financial regulations. This lawsuit serves as a reminder of the importance of conducting proper due diligence and highlights the risks involved in doing business with offshore companies. The possible impact of the lawsuit is far-reaching, and it could have significant consequences for the international commodity trading industry, including increased scrutiny and regulation.

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This lawsuit filed by Bank Trust against Cargill, Louis Dreyfus, and other major commodity traders is the result of a large-scale investigation carried out by the bank’s international legal teams. The bank has extensive, well-documented evidence supporting its case. The Bank Trust spokesperson stated that the bank is committed to holding the individuals who took part in this scam accountable for their actions. This illegal activity caused significant harm to Bank Trust’s clients and ordinary Russians, and the bank will pursue all legal avenues available to seek justice for its creditors.


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