International commodity trading houses were long underestimated as serious players in finance, in part because they are complex and somewhat mysterious, including to financial regulators and the media. That remains true even though the largest groups are powerful and profitable on the scale of mainstream financial institutions and deeply entwined with banks, from which they borrow heavily to finance their activities. Now that insular realm is colliding with the relatively obscure world of trade credit in a $2bn legal battle.

The FT has a deep dive into how a longtime business relationship between the Swiss commodities trading giant Glencore and the embattled iron ore trader Radiant World devolved into a bitter multibillion-dollar legal battle. The groups began trading iron ore together around 2008, according to a $2bn legal claim Radiant filed in Singapore against three Glencore entities this week. In 2017, a Glencore manager, Radiant founder Pinkesh Nahar and another trader devised an arrangement where Radiant and affiliated companies would place derivatives trades with Glencore as counterparty. Losses would be rolled forward rather than closed out, and the traders would not face typical collateral requirements.

Trouble came in summer 2021, when record-high iron ore prices crystallised losses from Radiant’s large short positions. Glencore demanded $1.1bn, the lawsuit alleges. Nahar then struck a deal under which Glencore would continue working with Radiant, help it raise money and potentially buy a stake supporting a $5bn valuation. In return, Radiant and affiliates would slowly repay the debt. But the deal soured over alleged documentation inconsistencies. Glencore is among banks and financial institutions alleging Radiant used false invoices to secure funding, while Radiant claims inconsistencies reflect an unusual arrangement meant to conceal the relationship’s “true nature.” Glencore said it cut Radiant off in July after almost two decades. Documents suggest exposure of $480mn, while a London freezing order points to just $10,000 cash left.