Bank Trust sues major traders in BVI for over $1 bln in fraudulent scheme

Russia’s Bank Trust has filed a lawsuit in a British Virgin Islands court against several major international commodity traders, including Cargill, Louis Dreyfus, Bunge, Quadra, Xangbo, and Liberty Commodities, alleging that they participated in a fraudulent scheme resulting in financial damages of over $1 billion.

Bank Trust's decision to file the lawsuit in a foreign court emphasizes Russia's continued pursuit of recovering funds after a banking crisis that occurred several years ago. Acting as an umbrella for the non-performing loans of Binbank, Otkritie, and Promsvyazbank – lenders rescued by the Russian central bank in 2017 – Trust seeks to capitalize on the credibility of an international judicial system to bolster its case and enhance the prospects of recuperating the significant amounts at stake.

In the lawsuit filed to the court, Bank Trust accused the major traders of conspiring with Russian businessman Mikail Shishkhanov, former owner of large private lenders Binbank and Rost Bank.

According to the lawsuit, between 2013 and 2017, Shishkhanov allegedly colluded with traders from the major commodity trading firms to conceal transfers from Binbank, intended to dissipate funds in violation of financial regulations.

Bank Trust claims that Binbank provided funds to these traders in the form of trade finance, which were subsequently redirected to offshore companies connected to Shishkhanov through shadow transactions. The traders then repaid the money owed to Binbank under their trade finance agreements using funds provided by the bank through separate loans to Rost Bank. These funds were moved to the traders via another series of shadow transactions with various other companies and were never returned to Rost Bank.

Bank Trust alleges that the international traders knowingly participated in the fraudulent scheme, assuming no financial risk while receiving commissions, while they also concealed the true motives behind their transactions under the guise of buying and selling commodities such as grain or crude rubber.

According to the claim, no actual shipping of goods took place. The trade finance transactions between Binbank and the traders appeared to be properly settled in Binbank's records, but the actual asset dissipation that occurred through these transactions was not detectable.

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As a result of the scheme, Binbank allegedly was able to manipulate its financial statements by displaying the high credit ratings of its nominal counterparties, such as well-known reliable traders, instead of the credit ratings of its actual counterparties, which were offshore shell companies.

In September 2017, the Bank of Russia placed Binbank and Rost Bank under temporary administration, having to provide funds to Rost Bank to enable the latter to return money to Binbank. Consequently, 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.

Bank Trust said it acts as the legal successor to Rost Bank under Russian law and thus it has the legal standing to claim damages incurred by Rost Bank.

"We are 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, to ordinary Russians, and we will pursue all legal avenues available to us to seek justice for the creditors,” a spokesperson for Bank Trust said in a statement.

At the time of publication Cargill, Louis Dreyfus, Bunge, Quadra, Xangbo, and Liberty Commodities as well as Shishkanov have not replied to a request for comment.

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