When commodity traders get caught

Companies and/or individuals involved: Swiss International Commodity AG (Switzerland)

Charges: Fraud

Swiss lawyers used: Adrian Bürgi, Pfäffikon SZ

Country affected: Switzerland

Proceedings: Switzerland (Swiss Financial Market Supervisory Authority, Staatsanwaltschaft Zug, Kantonsgericht Zug); Germany (Bundesanstalt für Finanzdienstleistungsaufsicht, Staatsanwaltschaft Ingolstadt, Staatsanwaltschaft Frankfurt); Austria (Finanzmarktaufsicht)

Outcomes:

• Eidgenössische Finanzmarktaufsicht: Investigation concluded; results are non-public
• Finanzmarktaufsicht: Pending
• Bundesanstalt für Finanzdienstleistungsaufsicht: Pending
• Staatsanwaltschaft Zug: Transfer of the matter to Germany
• Kantonsgericht Zug: Bankruptcy proceedings discontinued due to lack of assets
• Staatsanwaltschaft Ingolstadt: Pending
• Staatsanwaltschaft Frankfurt: Pending

Asset recovery: None

The case

“Global crises as a successful business model” – this is how Zug-based Swiss International Commodity AG (SIC AG) wooed private investors in 2021.

This sounds unsympathetic. And it was.

Even the background of SIC AG was quite unusual. In 2020, the catering company Introfoods AG decided to trade in commodities as SIC AG from then on. It increased its share capital from CHF 6 million to CHF 90 million, mainly through the contribution of shares in the Turkish fuel trader Lusso Petrolcülük Dagitim A.S. What is not clear is whether the shares were actually worth that much.

In mid-June 2020, SIC AG reported via a paid news service that it had received approval from the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, BaFin) on 8th May 2020 to “offer general and private investors their shares and equity bonds in the form of fixed-interest securities”.

On 12th April 2021, SIC AG published a success story about its strategy of supplying gasoline and diesel directly and lucratively to Turkish fuel stations. The company also quoted its CEO, a Swiss lawyer. He resigned on 28th April 2021.

On 11th October 2021, SIC AG also reported record results for the Turkish subsidiary – but pointed out that its balance sheet was not audited.

The details can hardly be verified now as the company is in liquidation and its website has been removed. The Turkish former president of the board of directors is nowhere to be found either.

There are, instead, reports about deceived investors. According to these reports, SIC lured investors via social media and cold calling and persuaded them to purchase shares and bonds. After the IPO planned for the end of 2021, the share price would be set to at least triple.

This unrealistic promise was, according to the reports, not the only warning signal: The reports state that the money had to be transferred to foreign accounts belonging to another company. In addition, SIC employees allegedly asked investors to give them direct access to their computers and, therefore, to their accounts. 

On 21st December 2021, the IPO was surprisingly cancelled. Instead, SIC AG announced on 5th January 2022 that the Turkish oil company Sanoil wanted to purchase SIC AG. In the same release, however, it also said that Sanoil did not want to buy SIC AG, but its subsidiary Lusso. The two are not compatible with each other. However, SIC AG urged investors to make further purchases. Only shareholders who held a certain minimum number of shares would be allowed to sell these shares to Sanoil — allegedly at a substantial profit.

From February 2022, events unfolded in quick succession. It started with warnings issued by BaFin and the Austrian Financial Market Authority (Finanzmarktaufsicht, FMA). The Swiss Financial Market Supervisory Authority (FINMA) appointed an investigator. The Zug public prosecutor’s office carried out an investigation, but handed the case over to its counterpart in Ingolstadt, Germany, in spring 2022. In the meantime, an investigation is underway in Frankfurt.

On 4th August 2022, bankruptcy proceedings were opened against SIC AG in Zug and discontinued on 14th February, 2023 due to a lack of assets.

The cheated investors never saw their money again.

Document related to this affair

• Schutzgemeinschaft für geschädigte Kapitalanleger e.V.: «SIC Swiss International Commodity AG – Anlagebetrug mit Aktien, Anleihen? Bewertung!» 

Timeline

Legislative loopholes

• Weaknesses in verifying the valuation of contributions in kind in the context of capital increases
• No specific supervisory authority in the commodities sector and no appropriate due diligence obligations for traders