Mitsubishi Corp. has reported a loss exceeding $90 million in China due to suspected fraud involving one of its copper traders, highlighting ongoing risks for major commodity trading houses.
The loss comes amid a series of recent misconduct cases in the sector. In October, Trafigura Group disclosed a potential $1.1 billion loss in Mongolia linked to employee fraud, according to Bloomberg.
While Mitsubishi’s loss is smaller, it has nonetheless raised concerns within the Japanese trading giant.
The company fired Gong Huayong, a Shanghai-based copper trader, after discovering that he conducted unauthorized trades with local companies, some of which had personal ties to him. Mitsubishi reported a 13.8 billion yen ($92.2 million) loss in its latest quarterly results, attributing it to “a loss in its Chinese trading business,” but provided no further details.
A spokesperson confirmed the loss was tied to Gong and assured that no additional losses would be recorded from the unauthorized trades. Mitsubishi’s shares fell as much as 2.1% following the news but later recovered slightly, trading down 0.7% around 1:30 p.m. Singapore time.
The spokesperson also confirmed that a criminal complaint had been filed and that Mitsubishi would cooperate fully with authorities, although they declined to comment further on the ongoing investigation.
Mitsubishi began investigating Gong’s trades earlier this year after some customers in its copper business failed to settle trades or defaulted on payments. According to sources familiar with the matter, Gong, a Chinese national and trading manager at Mitsubishi Corporation RtM China Ltd., facilitated payment deferrals for copper concentrate and refined copper by certain local companies, contributing to the losses.
In some cases, Mitsubishi had not approved these companies as counterparties, and in others, there were personal connections between Gong and the firms involved. Some sources suggest that Gong left China on business before his actions were fully uncovered and did not return.
One of Mitsubishi’s counterparties, which uncovered the alleged fraud through an internal investigation, has reported the matter to Chinese police. The Shanghai police have not responded to requests for comment.
For Mitsubishi, the loss is embarrassing but manageable.
