Mitsubishi Faces $90 Million Loss Due to Suspected Fraud by Copper Trader

Mitsubishi Corp. has reported a loss of over $90 million in its Chinese operations following suspected fraudulent activity by one of its copper traders. The loss is the latest in a series of incidents affecting major commodity trading firms, raising concerns about the risks individual traders may pose when handling substantial sums in global commodity markets.

The trader at the center of the incident, Shanghai-based Gong Huayong, was dismissed by Mitsubishi after unauthorized trades involving local companies, some of which were related to him. Mitsubishi had disclosed the $92.2 million loss in its latest quarterly financial results without detailing its cause, but confirmed on Wednesday that the loss was tied to Gong's unauthorized actions.

According to sources familiar with the matter, Mitsubishi began investigating Gong's trades earlier this year after some of its copper business customers failed to settle their obligations. The investigation revealed that Gong allowed certain companies to defer payments for copper concentrate and refined copper, often without Mitsubishi's approval and involving firms that had personal connections to him. Reports suggest that Gong left China on business before the extent of his actions was uncovered, and has since remained unreachable.

Mitsubishi has filed a criminal complaint and pledged full cooperation with authorities. The incident recalls other high-profile scandals within the commodity trading industry, including Mitsubishi's $300 million loss in 2019 due to rogue oil trading and the infamous $2 billion loss by Sumitomo Corp. in the 1990s due to unauthorized copper trades by Yasuo Hamanaka.

The latest loss, though smaller in scale compared to past scandals, is seen as a significant embarrassment for Mitsubishi, one of Japan's prominent trading houses known as sogo shosha. The company, however, reiterated its full-year profit guidance of 950 billion yen, emphasizing that the loss is manageable. Mitsubishi's shares fell by as much as 2.1% on the news before stabilizing to a 0.7% loss later in the day.

The incident is expected to result in increased caution within Mitsubishi's trading operations, particularly in China, where employees are concerned about potential fallout from the scandal. Mitsubishi's response may lead to even stricter internal controls to prevent future rogue trading incidents.