Russia’s state-owned Trust Bank turned to a British Virgin Islands court to sue major international agricultural and commodity trading companies, including Cargill, Louis Dreyfus and others, accusing them of participating in a fraudulent scheme which allegedly caused over $1bn in financial damages.

The unprecedented case marks Russia’s determination to recover funds that were allegedly siphoned off by Russian entrepreneur Mikail Shishkhanov in 2013-2017, when his activities led to bailouts of some large privately owned banks.

With vast sums of money at stake and transactions spanning across borders, the trading industry has become an attractive haven for money-laundering activities, some claim. In the quest for profit, large trading companies have been known to engage in dodgy practices that subvert regulations and circumvent tax laws.

The Central Bank of Russia (CBR) took over Trust Bank during the 2017 mini-banking crisis and tasked it to handle bad loans and manage assets of Russian banks bailed out several years ago. One of the assets under Trust Bank’s management is the formerly successful commercial Binbank, which was owned by Shishkhanov until the crisis hit the sector. Through legal proceedings in various international jurisdictions, Trust Bank is trying to recover funds from the former owners of these lenders, many of whom have since left the country.

Commodity trading companies Bunge, Quadra, Xangbo and Liberty Commodities are also among the companies in the lawsuit Trust Bank brought in the BVI court.

The bank claims that between 2013 and 2017 the aforementioned commodity trading companies were involved in the withdrawal of assets, which it claims were depositors' money, from Binbank for the personal benefit of Shishkhanov. Binbank would provide trade financing to multiple trading companies, but instead of using the funds to purchase and supply real goods, the traders would transfer the money to shell companies associated with Shishkhanov, Trust Bank alleges.

The commodity companies, registered in BVI, would subsequently receive second tranches of money from Binbank and its affiliate, Rost Bank, which they then used to repay traders. In turn, traders would repay Binbank loans within six to 12 months, as if they were ordinary trade finance loans, according to the allegations. In reality, the first trenches of the money were swallowed by Shishkhanov’s BVI firms for unknown use, Trust Bank claims.

Both Binbank and Rost Bank were later bailed out by the Russian authorities during the 2017 crisis.

For their part, the trading companies did not bear significant risks from these schemes and would receive commissions for the transactions they were carrying out, Trust Bank claims. Transactions even included guarantees from the parent companies of these commodity traders.

None of the companies mentioned in the lawsuit responded to bne IntelliNews request for comment.

Trust Bank has already won several international court cases, including in London and New York, against fugitive Russian bankers. Representatives from Trust Bank told bne IntelliNews the bank has “extensive, well documented evidence” to support the BVI claims and that it is “committed to holding both Shishkanov and the commodity traders accountable for the fraudulent scheme and to pursuing justice for its creditors and clients, who [are] mostly comprised of ordinary Russian taxpayers.”