ASIC claims to have busted Chinese food giant COFCO, trader Nicholas McGaw in alleged wheat price scheme

The Australian Securities and Investment Commission claims to have busted a wheat price manipulation scheme allegedly masterminded by subsidiaries of a Chinese state-owned food giant COFCO. In an alleged attempt to protect a short trading position, ASIC claims that COFCO subsidiaries engaged in a series of dodgy trades that pushed down the recorded price of eastern Australian wheat futures in 2022. Unveiling the Federal Court action against COFCO Australia and COFCO Resources, ASIC chair Joe Longo pointed to global challenges while arguing “fairness in commodities markets has never been more important”. “Consumers and economies have felt the impact of distorted supply chains through the pandemic, the Russia-Ukraine war and through increases in the cost of living,” Mr Longo said. In its Federal Court claim, ASIC claims dealings by COFCO subsidiaries on Australian Securities Exchange’s ASX24 derivative markets breached laws barring players creating or maintaining an artificial price for trading. The watchog’s action is based on COFCO Australia wheat trader Nicholas McGaw’s alleged dealings in futures contracts, each of which pledged the delivery of about 20 tonnes of the grain in January 2023. He allegedly put futures contracts up for sale shortly before the afternoon close of 34 trading sessions from January 17 to March 3, 2022. Mr McGaw did this with the undisclosed intention of making the daily recorded closing price for January 2023 futures lower than it would otherwise be, ASIC claims in the Federal Court. With the contracts allegedly put up by Mr McGaw resulting in trades on 22 occasions, the regulator claims he achieved the intended effect. ASIC claims to have a copy of an email allegedly sent by Mr McGaw to the COFCO’s broker JP Morgan on March 8, 2022, saying COFCO “was protecting its short position from another party bidding up” the closing price. The regulator is taking the legal action under civil prosecution provisions of the Corporations Act and is seeking declaration and financial penalties against the COFCO companies. Mr Longo said the COFCO subsidiaries had ”engaged in a repeated pattern of manipulation to benefit themselves to the detriment of other participants in the market”. “It erodes trust and confidence in our markets, increases costs for participants, hurts farmers, food manufacturers, importers and exporters, and impacts the prices Australians pay at the checkout,” he said.