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The aunt of Trafigura Mongolia's boss was the main partner company

The aunt of Trafigura Mongolia's boss was the main partner company

Trafigura’s top executive for Mongolia has been suspended pending an investigation into a fraud scheme worth billions of dollars at the Swiss trading firm. The executive, however, lent more than $500 million from Trafigura to a company owned by his aunt.

Lex Oil is Trafigura’s main counterparty in Mongolia. According to three sources and a document, it belonged to Erdenetuul who is the aunt of Trafigura’s suspended local boss Jononbayar Erdenesuren.

Trafigura announced last October it had suffered a loss of $1.1 billion after an internal investigation found that employees within its Mongolian petroleum product supply business had engaged in "serious misbehavior", such as manipulating documents and data to inflate the amounts paid by Trafigura, and to hide overdue receivables.

Trafigura's principal counterparty, the company stated, owed Trafigura a "substantial portion" of money. However, the company did not identify the counterparty nor any individuals because the investigation continues.

Sources claim that Jononbayar sold and lent hundreds of millions to his aunt's business.

Sources interviewed by Trafigura said that the risk department at Trafigura should have looked into family connections to determine if there were any conflicts of interest. This cast doubts over the level of oversight in one of the largest traders of energy and commodities.

Trafigura has been briefed on the concerns of two banking sources. They are concerned that Trafigura will uncover further fraud.

The reporting was based on the three sources familiar with Trafigura's Mongolia operations. It also included the two banking sources and an undated document issued by the Department of State Registration in Mongolia that showed Lex's ownership information.

A spokesperson for Trafigura said that an external investigation is ongoing. The company refused to respond to questions about the status of an investigation, which staff members have been terminated or suspended, and whether they were aware of Jononbayar’s links with its main trading partner.

According to three sources familiar with Trafigura, Jononbayar joined Trafigura in 2012, as his LinkedIn profile shows.

According to sources familiar with the situation, he is one of a few, unspecified employees who were placed on suspension last year.

Jononbayar's aunt Lex Oil and an attorney for the firm have not responded to comments sent via LinkedIn or by email. I was unable identify the lawyer who represents Jononbayar.

CUSTOMS LINK

The three sources claimed that in addition to Erdenesuren's work at Erdenetuul, Erdenesuren's mother also worked for the Customs General Administration of Mongolia, which supervises fuel imports.

Trafigura was Mongolia's largest fuel supplier by 2014, said the same sources. The sources claim that Erdenesuren was employed by the CGAM risk department from 2014 until 2018.

Erdenesuren or CGAM didn't respond to requests for comments on LinkedIn or via email.

Trafigura did not name any employees when it made its statement on the issue. It said in an October statement that they were taking "appropriate discipline action".

Three sources confirmed that Trafigura's internal investigation found no evidence to support the claim that Lex or Trafigura was treated preferentially by the CGAM.

Trafigura announced in October that it had conducted a review of the risks associated with its global network. It identified locations at higher risk, but did not identify them. The review revealed no significant findings.

SCANDAL EARLIER

The banking sources reported that Trafigura's bank traders were rattled by the $1.1 billion loss in one of the company's smallest markets, particularly as the incident followed a nickel fraud in Singapore, which cost the company nearly $600 million.

Trafigura released very few details regarding the latest incident but determined that the serious misconduct of individuals in Trafigura's Mongolian business occurred between 2019 and 2023.

According to its website and three trading sources, Lex Oil was established in 2019. It formed a partnership Trafigura.

According to two trading sources, Lex received credit for Trafigura, with which it gave credit to local fuel consumers so that they could purchase diesel imported by Trafigura and Lex from Russia and Singapore. Trafigura did not loan money to Lex, according to documents.

In 2020, the COVID pandemic halted Mongolian coal exports to China. This affected the mining sector and its fuel demand. Lex Oil, however, continued to blend fuel and lend to local companies, accumulating debts to Trafigura.

Trafigura reported in its December annual report that it had discovered evidence of "deliberate manipulating of data and documents, and concealing of overdue receivables". In its annual report in December, Trafigura said it had found evidence of "deliberate manipulation of data and documents and concealment overdue receivables".

According to a screenshot from the ownership document, Erdenetuul will sell Lex Oil to Dashnyam chinbat in 2022. He did not reply to a comment request. The records were removed from the website of the government, but the ownership changes are still visible on the non-profit Mongolian database OpenDataLab which tracks government disclosures.

According to a source in the Mongolian government, the new government elected last year has launched an investigation, but it is too early for the findings to be revealed.

Trafigura's annual report stated that the company had "increased its scrutiny" over the past few years.

It said: "We are building and extending on this work urgently." (Reporting Dmitry Zhdannikov; additional reporting Marwa Rashad, editing by Jason Neely).

(source: Reuters)