Jefferies gets new evidence of fake invoices at beleaguered fund tied to iron ore trader

Jefferies Financial Group Inc. has been told that some of the invoices underpinning its financing to an iron ore trader called Sapphire Minmetals Corp. are not genuine, according to people familiar with the matter.

The discovery, which came after Jefferies checked the veracity of the invoices with Vitol Group, is a further blow to the US bank and its Point Bonita fund. Bloomberg reported last week, citing people familiar with the matter, that Jefferies was reviewing its exposure to another iron ore trader, Radiant World, and had found discrepancies in some of the paperwork underpinning its financing to it but believed the underlying trades were real.

The developments are the latest to shine a light on the risks around receivables finance, which is typically considered safe because lending is secured by invoices but has recently been the cause of a string of embarrassing losses for banks and investors. Jefferies is already winding down Point Bonita and is facing investor lawsuits after the fund was hit by the collapse of auto supplier First Brands Group.


Neither Radiant World nor Sapphire Minmetals is well known outside of the insular world of iron ore trading. The two companies have a shared history, as Sapphire Minmetals was majority owned by Radiant World and its founder Pinkesh Nahar until 2015, corporate filings in Hong Kong show. The most recent filings show the parent company of Sapphire Minmetals as being a Singapore company called Sino Global Holdings Pte, which is in turn majority owned by Rakesh Sethi.

Jefferies has been checking the documents underpinning the Point Bonita fund’s financing to both Radiant World and Sapphire Minmetals in recent weeks, people familiar with the matter said, asking not to be named due to the sensitivity of the matter. When it contacted trading house Vitol to confirm the veracity of invoices involving Sapphire Minmetals, Vitol told it that some of the invoices were not genuine, the people said.

“We categorically and strongly deny the above rumors,” Sapphire Minmetals Chairman Sethi said in an email. “This is untrue and unsubstantiated.”

Representatives for Jefferies and Vitol declined to comment.

Bloomberg reported last week that several major commodity firms had stopped trading with Radiant World amid concerns it provided banks with falsified documents about iron ore trades. Radiant World has denied the allegations of wrongdoing. It has said its relationships with its counterparties are normal.

A spokesperson for Radiant World declined to comment on the company’s relationship with Sapphire Minmetals. Sethi said that he had nothing to add to the information in the public domain about the connections between the two companies.

The Point Bonita fund, which Jefferies manages and in which it has a stake of 5.9% according to its most recent quarterly report, has an exposure to Radiant World of less than $300 million, Bloomberg reported last week. The fund has a much smaller exposure to Sapphire Minmetals, a person familiar with the matter said.