June 10 (Reuters) – An investigation into the fraudulent use of aluminum stocks to raise funds in China has extended to three Shanghai-based companies suspected of having repeatedly pledged aluminum stocks, the Securities Times reported, supporting by the state.
The investigation comes after another trader, Ping An Trading Co Ltd, discovered this month that it had been duped into financing more than 30,000 tonnes of aluminum ingots, involving capital of 600 million yuan. , while actual inventory at a warehouse in Guangdong Province was lower.
Using commodities as collateral in financing in China is common and not illegal, but issuing receipts to repeatedly mortgage an asset is fraud and could leave more than one creditor holding claims against the same collateral. .
The case was widely discussed in the metals trading sector and spot aluminum prices fell when news of Ping An’s findings emerged last week, analysts said, although they stabilized from.
Repeated aluminum ingot pledges have now involved more than 20 companies and multiple delivery warehouses with inventory worth billions of yuan, the Securities Times reported on Friday.
The newspaper, citing an official from a company involved in the case, said the traders under investigation were Shanghai Juyi International Trade Co Ltd, Shanghai Haishirong Industrial Co Ltd and Shanghai Ruiguang International Trade Co Ltd.
The three companies declined to comment when contacted by Reuters.
The repeatedly pledged stocks of aluminum are in warehouses in Shanghai Nanchu, Zhejiang Kangyun and Ningbo Jiulong on China’s east coast, the newspaper reported, adding that some of them have been cordoned off.
Zhejiang Kangyun declined to comment when contacted by Reuters, while Shanghai Nanchu denied their inventories had been used for repeat promises.
Ningbo Jiulong did not respond to calls seeking comment.
The Guangdong warehouse linked to the Ping An case, Foshan Zhongjin Shengyuan, was also cordoned off by police after several owners tried to smuggle bullion out of it, the Securities Times reported.
Some warehousing companies said they were taking metals that had been taken out of implicated warehouses.
China is the world’s largest producer and consumer of aluminum, which is used in transportation, construction and a wide range of household items.
The case brought back memories of a major financial scandal centered on the port city of Qingdao in 2014, when a metal trading company duplicated warehouse certificates in order to repeatedly use a shipment of metal to lift funds.
The scandal affected major global banks, led to lawsuits over stock ownership and hurt China’s metals trade.
(Reporting by Emily Chow and the Beijing Newsroom; editing by Robert Birsel)
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