Great American Insurance Company has accused the US subsidiary of failed commodity trader Rhodium Resources of making false representations about its business model, part of a legal dispute over unpaid claims.
Steven Yit, the liquidator of Rhodium International Trading USA – the US arm of the collapsed trading house, which has since been renamed Antanium Resources – filed a lawsuit against the insurer’s credit and political risk division FCIA in early 2023.
Yit argued that under policies issued in 2019, FCIA was obliged to pay out on cover for eight invoices totalling over US$20mn after non-payment by Asian buyers of soft commodities, metals and coal.
The case revolves around several trades involving various buyers, including collapsed traders Longview Resources and Agritrade, ranging in value from as little as US$760,000 to as much as US$4.5mn.
After several firms fell into financial difficulty and failed to pay, Rhodium USA filed notice of claim and proof of loss forms through its broker Marsh in mid-2021.
But within weeks, these claims were rejected by the insurer.
In an amended defence document filed in late 2024 and seen by GTR, Great American argues Rhodium is “not entitled to the relief sought”, arguing that the trader made potentially fraudulent or incomplete representations about its own “history, status and the nature of its business”.
The insurer says Rhodium disclosed that its “core business was based on the physical trading of commodities”, billing itself as an offshoot of “one of Singapore’s leading independent commodity traders”, with group-wide revenues of about US$2bn from selling goods and chartering ships.
At a meeting with Great American in March 2019, months before the FCIA policy was issued, Rhodium USA allegedly showed a business plan that referenced a fleet of four bulk carriers and a plan to export soybeans and palm oil to Asia, while importing palm oil and Indian-origin steel to the US.
But the insurer says it now believes Rhodium’s transactions “involved solely the holding of financial instruments for trading purposes – specifically, unauthorised commodities futures trades and long-term financing, not the physical trading of commodity goods or trade logistics”.
The trader had disclosed its use of derivatives, futures, swaps, and other “paper only” transactions, yet presented these as ways to mitigate the risk of its physical trading, it says.
But Great American argues the trader has provided no proof it ever actually “owned the US$30mn commodity goods it claims to have sold”.
“No such trades occurred,” its defence filing says. “Rather, Rhodium USA never actually had title to any underlying goods, had no involvement with the shipment of the underlying goods, and had no dealings with the actual buyers and sellers reflected in the underlying bills of lading.”
Rhodium “falsely represented” that its business and that of its parent company was based on the physical trading of commodity goods and trade logistics, it alleges.
‘Undisclosed ties’
FCIA also claims that during the underwriting process Rhodium USA “represented that it was founded in 2017”, but was actually created as a legal entity just days before the policy was incepted, “with no business operations of its own”.
And the defence filings allege the insurer was unaware of ties between Rhodium and some of its buyers, such as Longview and its former chief executive and president Richard Maurer.
Maurer had previously formed an entity in Georgia named Rhodium Resources USA Inc, which was later renamed to the Bolt-Hole Group. When Rhodium International Trading USA was established in 2019, the legal address given was the same as the Bolt-Hole Group, the insurer alleges.
“Rhodium USA did not disclose that it would be involved in purported arms-length transactions with entities owned by Richard Maurer, an individual with whom Rhodium USA shared its business address,” it says.
Maurer was not immediately available for comment, and a legal representative for Rhodium’s liquidator Yit did not reply to emails from GTR. Great American declined to comment.
Nonetheless, Yit argues FCIA remains in “breach of contract” for refusing to pay out on the claims.
Yit’s lawsuit against the insurer argues it “failed to conduct an adequate investigation of Rhodium USA’s claims, failed to properly evaluate the claims [and] applied an unreasonably restrictive construction of the FCIA policy’s provisions”.
It also says the insurer has “relied on ambiguous, inapplicable, unenforceable and/or nonexistent policy provisions” in denying the insurance claims.
The US court case is one in a series of disputes between commodity traders and credit insurers that have revolved around whether traders had actually obtained title to goods being sold.
Rhodium was one of several traders that collapsed during the pandemic, and was believed to owe more than US$620mn to creditors at the time of its demise.
