Trafigura's top executive in Mongolia, currently suspended during an investigation into a billion-dollar fraud scheme, lent over $500 million of the company's funds to a firm owned by his aunt. The firm, Lex Oil, serves as Trafigura's primary counterparty in Mongolia and is owned by Erdenetuul, the aunt of Trafigura’s suspended executive, Jononbayar Erdenesuren. An internal review revealed that some employees in Trafigura's Mongolian petroleum products supply business engaged in serious misconduct, including inflating payments to the company and concealing overdue receivables, resulting in a $1.1 billion loss reported last October.
Although Trafigura indicated that its primary counterparty owed a significant amount of money, it did not disclose the identity of the counterparty or any individuals involved, as the investigation is still ongoing. Sources indicate that Jononbayar was involved in selling fuel and providing substantial loans to his aunt's company. There are concerns regarding the oversight within Trafigura, with suggestions that the risk department should have evaluated potential conflicts of interest tied to family connections.
Furthermore, concerns have arisen among banking sources that Trafigura may uncover further fraudulent activities. An external investigation is currently being conducted, but the company has not clarified the status of the ongoing inquiry or whether it was aware of Jononbayar’s familial ties to its main trading partner. Jononbayar has been with Trafigura since 2012, and records indicate he was among a small number of employees suspended last year.
In addition to his dealings with Lex Oil, Jononbayar's mother, Erdenesuren, who worked in the Customs General Administration of Mongolia (CGAM), oversaw fuel imports. Trafigura became Mongolia's leading fuel supplier around 2014, during which Erdenesuren was employed in a risk management capacity at CGAM until 2018. To date, neither Erdenesuren nor CGAM have responded to inquiries regarding their involvement or situational oversight.
Trafigura has not publicly named any employees in relation to the incident, only stating that appropriate disciplinary actions are being taken. An internal investigation did not reveal any preferential treatment for Lex or Trafigura from CGAM. Despite experiencing a significant financial setback in this relatively small market, Trafigura's banking partners remain concerned, especially following a previous unrelated fraud incident in Singapore, which incurred a nearly $600 million loss for the company.
Despite limited information, Trafigura confirmed that the serious misconduct identified in Mongolia occurred between 2019 and 2023. Lex Oil, established in 2019, partnered with Trafigura to provide local fuel users with credit for diesel purchased from Russian and Singaporean imports. Though operations were interrupted by the COVID-19 pandemic, Lex Oil continued fuel imports while accruing debt to Trafigura.
In its latest annual report, Trafigura disclosed the discovery of deliberate data manipulation and the concealment of overdue receivables, which led to a loss of $358 million associated with Mongolia for 2024. Erdenetuul sold Lex Oil in 2022 to her husband, Dashnyam Chinbat, but the ownership records that confirm this transaction have since been removed from the government website, although they still appear in records maintained by the Mongolian non-profit database OpenDataLab.
A source from the Mongolian government indicated that a new investigation has been initiated by the recently elected government, although findings have yet to be disclosed. In its annual report, Trafigura noted that the detection of wrongdoing in Mongolia was a result of increased scrutiny in recent years and emphasized ongoing efforts to enhance their oversight measures.