U.S. hedge fund sues LME over London nickel scandal ! Elliott Management is demanding more than $456 million in compensation from the London Metal Exchange for its decision to cancel nickel trading in March.
U.S. hedge fund Elliott Management is suing the London Metal Exchange (LME) for more than $456 million in compensation for its decision to cancel nickel trading following an unprecedented spike in nickel prices in March.
Laterite nickel ore
The lawsuit
LME parent Hong Kong Exchanges and Clearing (HKEX) said on Monday that on June 1, Elliott Management, through two subsidiaries, filed a litigation lawsuit in the UK High Court against LME Clear
The lawsuit, filed by the Florida-based group founded by billionaire Paul Singer, said the cancellation of the March 8 nickel contract deal was “unlawful in public law and/or constitutes Violations of Claimants’ Human Rights”.
The Hong Kong exchange said it would “forcefully” refute the claim, which it considered “unfounded”.
Elliott Management’s lawsuit concerns a decision by the 145-year-old exchange in March to cancel one-day nickel trading and suspend trading for eight days.
That will add to the woes of the LME, which is trying to restore its reputation as the world’s leading exchange for industrial metals, including nickel used to produce stainless steel and lithium-ion batteries for electric vehicles.
The LME decision came after nickel prices soared 250% to a record $100,000 a ton as many banks and brokers squeezed out large short positions accumulated by Chinese stainless-steel producer Tsingshan Holding Group after the outbreak of the Russian-Ukrainian war.
The LME has decided to cancel a trading day due to a price surge. The exchange claims that the price hike has pushed several smaller exchange members to the brink of bankruptcy. The move sparked dissatisfaction among some traders, who felt it wiped out their profits.
Elliott Associates, L.P. and Elliott International, L.P. sued the LME in the U.K. High Court on June 1, according to an announcement issued by the Hong Kong Stock Exchange, the parent company of the LME.
“LME management believes that the claim has no legal basis and the LME will vigorously defend it,” the announcement said.
After nickel prices surged in March, the LME issued more than $7 billion in margin calls, nearly four times the previous one-day high. The LME cancels billions of dollars in trades at the top.
The case also prompted Britain’s financial regulator to launch an investigation in April into the “disorderly market” in nickel contracts over this period, assessing the extent of the dislocation in the nickel market.
The LME has said one reason it did not react to the nickel squeeze earlier is that it does not know how much business is done off-exchange through derivatives.
