Jefferies Says Glencore Owes $526.4 Million on Radiant World Invoices. Glencore Denies It

Jefferies Financial Group says it is owed $526.4 million on invoices that carry Glencore's name. Glencore says it owes Jefferies nothing.

The standoff centers on Radiant World, an iron ore trader that had become one of the most important customers of Jefferies' Point Bonita trade finance unit. Email exchanges attached to legal filings and seen by Bloomberg News show Jefferies' tone hardening over several months, from concern to anger to what Bloomberg described as "righteous indignation."

How the dispute started

Through a Point Bonita fund called LAM Trade Finance Group II LLC, Jefferies financed billions of dollars of receivables for Radiant World and for Sapphire Minmetals. Sapphire is a closely related but legally separate iron ore trader. Both were among Point Bonita's biggest clients.

Early this year, payments began arriving late. Glencore and Vitol Group, the commodity traders whose names appeared on the invoices, eventually denied that the invoices were genuine.

Jefferies' position is simple. Glencore's name is on the paper the fund bought, so Glencore owes the money. The $526.4 million is the amount Jefferies says remains outstanding.

The July 1 email

Glencore denied owing anything. On July 1, Jefferies general counsel Mike Sharp wrote to his counterpart at Glencore.

"We have a deadly serious issue," Sharp wrote. "I am, of course, willing to hear Glencore out, but flat denials and ignoring a half-decade history of a well-trodden course of business conduct just don't work."

Sharp's reference to a "half-decade history" points to a long-running business relationship, which Jefferies cites as support for its claim.

Glencore's account

A Glencore spokesperson said that when the company was first contacted about certain invoices involving Radiant and LAM TFG, it "confirmed that we had no record of the invoices having been assigned and that they had been paid." The spokesperson added that Glencore subsequently understood LAM TFG and Radiant had reached an arrangement.

Bloomberg's reporting adds a wrinkle. It says Glencore appeared to have evidence that the smaller company was borrowing against invalid invoices months before Glencore cut ties with Radiant. Bloomberg also said it has not seen all the emails among Jefferies, Glencore and Radiant, and that the full context of the exchanges is not always clear.

Fraud allegation and counter-suit

A lawyer for Jefferies told a London court in mid-September that Radiant World had been part of a "very large scale fraud." That is an allegation made in litigation. It has not been tested or ruled on.

Radiant World denies wrongdoing. It says the allegations against it stem from a commercial dispute with Glencore. Sapphire Minmetals also denies falsifying invoices.

The two traders have joined in a $2 billion lawsuit against Glencore in Singapore. Glencore calls that suit "meritless."

So there are two competing accounts. Jefferies says its fund bought invoices in good faith against major counterparties who now disown them. Radiant and Sapphire say the real fight is a commercial dispute with Glencore. Glencore says it has no record of the invoices being assigned to the fund and that they were paid.

What the numbers show

The headline figure is large. A $526.4 million exposure sits on one trade finance fund's books, tied to two related clients. The amount was financed against receivables from counterparties who now say they never owed it.

No court has ruled on whether the invoices were genuine, whether Glencore was bound by them, or whether anyone committed fraud. No judgment has been entered against Radiant World, Sapphire Minmetals or Glencore.

The cases that will decide it are the London proceeding, where Jefferies' lawyer made the fraud allegation, and the $2 billion Singapore suit. The unresolved question is who ends up holding the $526.4 million: Jefferies, Glencore, or the traders whose names are on the paperwork.