Jefferies Financial Group's Point Bonita fund is facing renewed scrutiny after discovering some invoices supporting its financing to iron ore trader Sapphire Minmetals Corp. are not genuine. This discovery follows Jefferies' review of documents with Vitol Group and compounds earlier issues with another iron ore trader, Radiant World.
The Point Bonita fund, which Jefferies manages and holds a 5.9% stake in, has been under pressure. Last week, Bloomberg reported that Jefferies was examining its exposure to Radiant World due to discrepancies in paperwork, though it believed the underlying trades were legitimate. The fund has an exposure of less than $300 million to Radiant World and a smaller amount to Sapphire Minmetals. Both companies have historical ties, with Sapphire Minmetals previously being majority-owned by Radiant World and its founder Pinkesh Nahar.
These developments are part of a larger trend highlighting risks in receivables finance, a type of lending typically considered low-risk because it's secured by invoices. Jefferies is already in the process of winding down Point Bonita and is facing lawsuits from investors. This follows significant losses incurred from the collapse of auto parts supplier First Brands Group, where fraudulent invoices were also allegedly involved, and separate losses related to Market Financial Solutions. Sapphire Minmetals Chairman Rakesh Sethi has strongly denied the allegations, stating they are "untrue and unsubstantiated."
