LONDON, March 25 (Reuters) - Trafigura's top executive in Mongolia, who has been suspended while a billion-dollar fraud scheme at the Swiss trading house is investigated, loaned over $500 million of Trafigura’s money to a firm owned by his aunt, Reuters has found.
The firm, called Lex Oil, is Trafigura’s principal counterparty in Mongolia. It belonged to Erdenetuul, the aunt of Trafigura’s suspended local boss, Jononbayar Erdenesuren, according to three sources close to Trafigura and an ownership document. Trafigura said last October that it had recorded a $1.1 billion loss after an internal review found that some employees in its Mongolian petroleum products supply business engaged in "serious misconduct", including manipulating data and documents to inflate sums being paid by Trafigura and to conceal overdue receivables.
The company said its principal counterparty owed Trafigura "a substantial portion" of the money, but did not name the counterparty or any individuals as the investigation is ongoing.
According to the sources, Jononbayar sold fuel and loaned hundreds of millions of dollars to his aunt’s company.
The sources interviewed by Reuters said Trafigura's risk department should have assessed family connections for possible conflicts of interest, casting doubts on the rigour of oversight at one of the world’s largest energy and commodity traders.
Two banking sources briefed by the company said their main concern regarding the matter was that Trafigura would uncover more fraud.
Reuters' reporting is based on three sources close to Trafigura familiar with the details of its Mongolia operations, the two banking sources, as well as an undated document from Mongolia’s Department of State Registration showing Lex's ownership details.
A Trafigura spokesperson said an external investigation was ongoing. The company declined to answer questions posed by Reuters on the status of the investigation, on which, if any, staff have been suspended or terminated, or on whether it was aware of Jononbayar’s links to its main trading partner.
a move Wall Street took as a sign of flexibility on the matter that has roiled markets for weeks.
Jononbayar has been with Trafigura since 2012, the three sources close to Trafigura said, and his LinkedIn profile shows.
He is among a small, unspecified number of employees who were suspended last year, according to people familiar with the matter.
Jononbayar, his aunt, Lex Oil, and a lawyer for the firm did not reply to requests for comment via LinkedIn or email. Reuters was unable to identify a lawyer representing Jononbayar.
CUSTOMS LINK In addition to his business dealings with his aunt’s firm, Jononbayar’s mother, Erdenesuren, Erdenetuul's sister, worked in the Customs General Administration of Mongolia (CGAM), which oversees fuel imports, the three sources said.
Trafigura became Mongolia's key fuel supplier around 2014, according to the same sources. Erdenesuren worked in the CGAM’s risk department for several years until 2018, the sources said.
Erdenesuren and CGAM did not respond to Reuters' requests for comment on LinkedIn or by email.
Trafigura has not named any employees in its statements on the matter, saying in a statement in October only that it was taking "appropriate disciplinary action".
An internal investigation by Trafigura found no evidence that Lex or Trafigura received preferential treatment from the CGAM, the three sources said.
In October, Trafigura said it had performed a risk review of its global network, identified higher-risk locations which it did not name, and that the review of those places resulted in no significant findings.
EARLIER SCANDAL
Suffering a $1.1 billion hit in one of its smallest markets has rattled Trafigura's bank trade financiers, the banking sources said, especially as it followed an unconnected nickel fraud in Singapore that cost the company almost $600 million.
Trafigura has released few details about the latest incident, but has determined the serious misconduct by individuals in its Mongolian business took place between 2019 and 2023.
Lex Oil was set up in 2019, according to its website, and forged a partnership with Trafigura, the three trading sources said.
Lex received credit from Trafigura with which it provided credit to local fuel users so they could buy diesel, which Lex and Trafigura were importing from Russia and Singapore, according to two trading sources. Reuters was unable to find documents showing that Trafigura loaned funds to Lex. The business was jolted by the onset of the COVID pandemic in 2020, which halted Mongolia's coal exports to China and therefore hit its mining activity and the sector’s demand for fuel. Yet Lex Oil continued to import and blend fuel, and to lend to local firms, building up debt to Trafigura, according to the trading sources.
In its annual report in December Trafigura said it had found evidence of "deliberate manipulation of data and documents and concealment of overdue receivables". It booked a $358 million loss related to Mongolia for 2024.
Erdenetuul sold Lex Oil in 2022 to her husband, Dashnyam Chinbat, according to a screenshot of the ownership document. He did not respond to a Reuters request for comment. These records have since been deleted from the government website, however, the ownership change still features on Mongolian non-profit database OpenDataLab, which tracks disclosures by the government.
A Mongolian government source said the country's new government, elected last year, had launched an investigation into the case, but that it was too early to disclose findings.
In its annual report Trafigura said the wrongdoing in Mongolia had been detected due to the company’s “increased scrutiny” in recent years.
“We are significantly building on and extending this work as a matter of urgency,” it said.
Reporting by Dmitry Zhdannikov, additional reporting by Marwa Rashad; editing by Jason Neely

Published Date:2025-03-25