Copper Caper: Commodities Trader Conned By "Painted Rocks”

Last June, Mercuria agreed to buy copper from Bietsan, a Turkish supplier it had done business with before, according to Sinan Borovali, the Turkey trading house's lawyer. It appears that copper was initially loaded into the first shipment of containers, before being surveyed by an inspection company. Seals used to prevent fraud were then affixed to the containers.

But under the cover of darkness, it is alleged the containers were opened and the copper replaced with paving stones, Borovali of Istanbul law firm KYB said in an interview. The fraudsters switched between fake and real container seals in an effort to avoid detection.

As ships left Marport terminal in the port of Ambarli every few days, the same thing happened: the copper was secretly unloaded at night and replaced with painted rocks. "This was how they did it," Borovali said.

With the vessels at sea, Mercuria paid $36 million in five installments, with the last payment made on Aug. 20, 2020, according to documents provided by the commodity trader to Turkish investigators. The fraud wasn't discovered until the ships began arriving in the Chinese port of Lianyungang later that month. By then, all eight vessels were en route to China.

"There has been a criminal investigation petition by the buyer against the seller and two intermediaries," Turkish police said in a statement. "It's been determined that the incident is the outcome of fraud perpetrated in an organized manner."

Normally, in such cases of non-delivery a trading house could make a claim against a cargo's insurance policy. But Mercuria found that just one out of seven contracts used by the Turkish company to insure the cargo was real. The rest had been forged.

It appears someone at Mercuria may have not done proper due diligence into the Bietsa, or at least followed up on the legitimacy of the insurance contracts on the cargo. 

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