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An Asian-based trader Foreland is tussling with IG Group Holdings Plc to return profits arising from the short squeeze in nickel in 2022, claiming that the online broker should have paid out on bullish bets despite the cancellation of underlying trades on the London Metal Exchange.
As with prior high-profile cases launched by investors including Elliott Investment Management and AQR Capital Management, the suit centers on the LME’s unprecedented decision to suspend the nickel market and cancel billions of dollars in trades made at eye-watering record highs in March 2022. This case however is targeted at a broker, differing from previous lawsuits which were against the LME.
Foreland in July lost its substantive claim against IG Asia for S$22.6 million ($17.3 million), and last month lodged an appeal in Singapore against IG Asia, court filings obtained by Bloomberg show.
Foreland, which operates trading and investment businesses in Singapore and Japan, had turned bullish on nickel before prices took off. It cashed out on trades it had placed with IG Asia on March 8, when nickel topped out at more than $100,000 a ton. But after the LME canceled the day’s trades, IG withheld the profits held in Foreland’s accounts and enacted trades that reversed those transactions, the court judgment shows. Nickel traded just below $16,000 a ton on the LME on Friday.
A Foreland representative declined to comment. A spokesperson for IG Asia, part of London-listed IG Group, said the company is unable to comment on an ongoing legal matter.
While most investors access the LME directly through specialist brokers and banks, Foreland was trading using so-called contracts for difference signed bilaterally with IG Asia. The firm argued the LME’s decision to cancel trades on the exchange had no bearing on IG’s contractual commitment to pay out on its CFDs, a type of derivative to enable speculation on the underlying price of an asset.
After 11 days of trial, the Singapore judge ruled that under the terms of its contracts, IG Asia was entitled to halt payments to Foreland after the underlying market was suspended, as prices for the nickel CFDs are derived from the LME nickel prices among other reasons. He noted that IG referenced the bourse’s nickel prices for those CFDs as well as sought to hedge its exposure on the LME via Goldman Sachs & Co LLC and Macquarie Bank Ltd.
IG Asia’s act of reversing the trades itself was wrong, according to the judge, who awarded S$1,000 each to Foreland’s entities in Singapore and Japan. He ruled however that the firm had not shown it suffered any proven loss caused by this reversal.
The case is Foreland Singapore Pte. & Anor v IG Asia Pte.
(By Mark Burton and Takashi Nakamichi)
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