The aluminium trade scammer involved in the metal inventory fraudulence in China that havocked more than USD 1 billion in losses nationwide businesses has been sentenced to life imprisonment by a judicial court in the eastern province of Zhejiang.
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Chen Xi, who managed quite a few trading houses and warehousing firms, was jailed in June 2022 over his involvement in a high-profile over-pledging ruse when borrowers discovered that the metal they had invested in was nothing but thin air. As mentioned by Bloomberg, the court decree quoted him as the architect and directed Xi’s personal possessions to be seized by the state.
This tops the string of high-profile metal fraud controversies that shocked the industry in the past years. Chen’s stance was about tens of thousands of aluminium ingots, numerous state-owned enterprises, private merchants and four central warehouses in China. It is considered among the country’s most solemn trade industry crimes, following back to the vast loan hoax around metals reserves in Qingdao, which took place nearly a decade ago.
Chen, along with colleagues and several warehouse managers, is accused of duplicating inventory receipts to create false storage records and sell aluminium stockpiles that did not exist, according to the court’s ruling. The sales agreements were connected to so-called repurchase agreements, or “repos,” which include terms for repurchasing the inventory after a specified period. This means the metal is used as collateral to generate short-term cash flow for the seller.
From the end of 2017 till May 2022, Chen and his associates obtained RMB 7.6 billion (USD 1.1 billion at May 2022 rates) in funds and over 2,000 tonnes of aluminium ingots by selling fake inventories to more than 40 companies, the court said, causing a combined loss of RMB 6.8 billion (USD 938.4 million).
The funds were utilised to manage trading losses, invest in speculative futures, and uphold a sumptuous lifestyle, as mentioned in the ruling.
The court said Chen had lured companies with annualised paybacks of 7 per cent to 14 per cent interest, along with prepaid assurances equivalent to 15 per cent of the total trade deal, ahead of purchasing the exact cargo back.
Chen’s solicitors have not responded to messages for comments on the matter. Bloomberg News was unable to contact Chen, a once prominent figure among the physical traders in eastern China. The court documents did not specify whether Chen had appealed the ruling.
China’s commodities financing has traditionally been opaque. Still, over the past three years, authorities have strengthened their efforts to crack down on trades that they view to offer little financial advantage. This investigation, which focused on physical dealings being manipulated to guarantee frugal financing or government subsidies, gained new levels in 2023 and eventually led to Beijing barring state-owned firms from specific trades.
Prior to this crackdown, some state-owned corporations widely utilised commodities-linked dealings, taking the edge of inexpensive credit from government-run banks to boost their incomes. This practice indirectly provided liquidity to thousands of more diminutive local traders who were toiling with lean profit margins in a competitive industry.
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