Life behind bars: Chinese aluminum trader sentenced for $1 billion fraud scheme

Bloomberg unveils in a new article that a Chinese aluminum trader has been handed a life sentence for orchestrating one of the largest metal inventory frauds in recent years. 

Chen Xi, Chinese aluminum trader, has been sentenced to life in prison for his role in a massive metal inventory fraud that caused over $1 billion in losses. The case, which was heard in Zhejiang province, has rocked China's metal trading industry. Chen, who controlled several trading firms and warehousing businesses, was arrested in June 2022 after lenders discovered that the aluminum stockpiles they had financed didn’t actually exist.

According to a court ruling, Chen was identified as the mastermind behind the scheme. His personal assets have been ordered to be seized by the government. The fraud is considered one of the largest in recent years, involving tens of thousands of aluminum ingots and spanning several state-owned companies, private traders, and multiple major warehouses across China.

Chen and his associates, including warehouse managers, were found to have fabricated inventory receipts to sell non-existent aluminum stockpiles. These sales were linked to "repos" or repurchase agreements, where the metal was sold with the promise of repurchasing it later, using it as collateral for short-term cash flow.

Between late 2017 and May 2022, Chen and his network secured 7.6 billion yuan ($1.1 billion) and over 2,000 tons of aluminum by selling the fake inventory to more than 40 companies. The fraud resulted in total losses of 6.8 billion yuan. The funds were used to cover trading losses, speculate in futures markets, and support a lavish lifestyle.

The court also revealed that Chen promised companies annual returns of 7 per cent to 14 per cent, along with prepaid guarantees equal to 15 per cent of the total transaction value. Chen’s lawyers did not respond to requests for comment, and it is unclear if he plans to appeal the verdict. The case is part of a broader crackdown on opaque commodities financing in China.

By Naila Huseynova