And why doesn’t that mean you have to be part of it
Let’s start with a joke I probably shouldn’t make.
“Access to trades like this… oh no, wait, let me check the Code of Conduct:
‘We do not engage in corruption and we never pay bribes regardless of who we are dealing with or what the local custom is.’”
Right.
Look, what we’re going to talk about isn’t funny.
People have died.
Countries have been looted.
And the commodity world is regularly at the center of those stories.
But this is YouTube/Internet.
If it’s not a bit entertaining, you won’t stick around long enough to learn anything.
So in this post, I want to walk you through:
- The four most common illegal or shady activities that put commodity trading firms in trouble
- Why we see more of this in commodity trading than in many other industries
- And a final nuance: why you can still work in this industry without becoming part of the rot
I’m Damien, from Geneva, Switzerland.
I own a bunch of businesses around commodities, and I grew up in the same city where most of the big trading houses are headquartered.
I know the people. I went to school with many of them. I understand how this game is played.
Let’s get into it.
1. Tax Optimization vs Tax Evasion
Let’s get the boring one out of the way: taxes.
Every large international corporation uses tax optimization structures:
- Jurisdictions with lower corporate tax
- Transfer pricing
- Royalties and fees shifted between entities
Push that too far, and it becomes tax evasion.
That’s not unique to commodity trading.
Tech, pharma, consumer goods – everybody plays that game.
Important? Yes.
Interesting? Not really.
So let’s move on to the juicy stuff.
2. Market Manipulation: Moving Benchmarks, Moving Millions
Now it gets more interesting: market manipulation.
Recently, several big trading houses have been fined by regulators for manipulating fuel oil benchmarks.
Think Vitol, Glencore, Trafigura – one after another getting slapped.
These cases haven’t made front-page headlines because they’re in a boring corner of the market: fuel oil (used for power plants and ships).
But the mechanics matter, because this is how it works in many physical markets.
How the Benchmark Game Works
Physical commodity prices often reference benchmarks assessed by price-reporting agencies (PRAs) like Platts (part of S&P Global).
Platts doesn’t just “invent” a number.
They:
- Observe bids, offers, and executed deals
- Collect “market color” from traders
- Focus on a specific time window during the trading day (often 30–45 minutes)
That short assessment window gives certain players a lot of power.
If you can influence the prices that show up during that window, even with relatively small orders, you might move the benchmark up or down.
Now imagine this setup:
- You have a long-term contract to sell a certain volume of fuel oil every month at: Benchmark price + $50/ton
If you can push the benchmark slightly higher during Platts’ window, your physical sales price rises accordingly.
Flip side:
- You’re the buyer on a long-term contract at: Benchmark price + $25/ton
Now you’d like the benchmark to print as low as possible.
So how do people cheat?
They:
- Place bids/offers that they never intend to execute
- Show volumes to move sentiment
- Layer fake or tiny trades to influence the assessed level
Even a small move in the benchmark, applied to huge physical volumes over months and years, can add up to very serious money.
And no, this isn’t unique to oil, or to physical trading houses.
If we’re honest, the real market manipulation specialists are:
- Big banks
- High-frequency trading shops
- Sophisticated financial firms spoofing and gaming order books all day
The energy and commodity guys are just playing their version of the same game.
“Insider Trading” – Why It Technically Doesn’t Exist Here
There’s a fun legal nuance:
Insider trading, as defined in stock markets, doesn’t technically exist in commodity markets.
By definition, insider trading is:
Trading a listed company’s stock based on non-public, material information about that company.
But in commodities:
- There is no “Wheat Inc.” that sets global wheat supply
- There is no single “Oil Corp.” deciding the oil price
So, if a big trader gets wind that a government is about to ban exports, or that a crop has failed, and positions accordingly…
Morally questionable? Maybe.
Legally, it’s not insider trading in the stock-market sense.
Years ago, there were rumors that a major trader pushed for a Russian wheat export ban after a bad harvest, then made a fortune on the price spike.
But again: no “Wheat Company” shareholders were deprived of information.
So legally, it’s not the same category.
Gray? Very.
Illegal? Different story.
3. Corruption: The Default Operating System
Now we arrive at the monster in the room: corruption.
This is the big one.
It shows up everywhere, in every direction:
- Companies bribing officials
- Politicians favoring companies
- Lobby money reshaping regulation
And it’s not just “poor countries”.
How Countries Clean Up (A Bit)
Some countries have tried – with relative success – to reduce corruption:
- Singapore in the 1960s:
Widespread corruption, then aggressive anti-corruption laws, higher civil servant salaries, and a powerful independent bureau.
Today, it’s one of the least corrupt countries on earth. (Does that mean zero corruption? Of course not.) - Estonia after 1991:
Coming out of the Soviet system, corruption was normal.
They rolled out e-government, digitized processes, and reduced in-person interfaces – making it harder to “grease” the system.
They’re not perfect.
But they show it’s possible to move from “totally corrupted” to “livable and relatively clean”.
Corruption as a Symptom of a Failing Elite
Corruption isn’t just envelopes under the table.
Sometimes it’s structural.
Example: large political donations → regulatory “luck” later.
A big investor backs a political party heavily.
Later, a pipeline project that would compete with his railway oil business magically gets blocked “for environmental reasons.”
Did he call and say “kill the pipeline”? Probably not.
He doesn’t need to.
The political class:
- Knows where their campaign money comes from
- Knows which decisions keep that money flowing next cycle
- Aligns incentives without needing explicit instructions
That’s corruption without fingerprints.
And it’s often the first sign of a declining system:
when the people in power are more focused on extracting from the country than serving it.
Back to Commodity Trading
In commodities, corruption cases are endless:
- Oil deals in opaque regimes
- Mining licenses that mysteriously land in friendly hands
- Customs and tax “adjustments”
- Bribed state company officials choosing overpriced tenders
You could talk about:
- Glencore in Chad
- Bloomberg’s famous recordings of traders caught on tape
- The gigantic Brazilian “Car Wash” case (Lava Jato) involving politicians and oil companies across the board
It’s everywhere.
Weekly. Daily.
And here’s the philosophical problem:
- Corruption destroys the social fabric
- Yet corruption is deeply human
Since the Middle Ages, the pattern has been the same:
- People with weapons “protect” those without
- Then they realize:
“We have the weapons. Why don’t we own everything, actually?”
Today, it’s the same game with different costumes:
- Governments, elites, and sometimes companies extract as much as they can
- Legally, semi-legally, or blatantly illegally
Should commodity trading firms stop bribing?
Yes. Obviously.
Will it magically fix the system?
No.
Because as long as there are people willing to take bribes, there will always be someone willing to pay them.
Do I know how to fix that?
No. I’m not that clever.
4. When Cost-Cutting Actually Kills People: The Probo Koala Case
The last category is the darkest:
When decisions taken in a trading company directly lead to people dying.
The most infamous case in the last decades is the Probo Koala toxic waste dumping in Côte d’Ivoire.
What Happened?
In the early 2000s, Trafigura produced about 100+ tons of toxic waste on board its ship, the Probo Koala, by washing a very dirty petroleum product.
They knew the waste was hazardous.
They tried to dispose of it properly in several countries:
- Malta
- Italy
- The Netherlands
- Nigeria
In Amsterdam, a Dutch company started unloading and processing a small amount.
Residents complained of horrible smells, nausea, dizziness.
Proper disposal was quoted at around $620,000.
Trafigura said:
“No, too expensive.”
So they sailed off.
Eventually, the waste was shipped to Côte d’Ivoire.
A local company in Abidjan offered to dispose of it for about $116,000.
Everyone involved knew that:
- There was no proper local facility capable of safely handling that kind of waste
- That price implied shortcuts, dumping, and shady practices
On the night of 18 August 2006, trucks dumped the toxic waste at 17–18 sites around Abidjan.
The result:
- Tens of thousands suffered health problems
- Over 100,000 people sought medical care
- Around 15–17 people officially died
- A poor country had to handle massive cleanup costs it could barely afford
All because somewhere in a trading company, someone didn’t want a $600k hit on their P&L after having made a lot of money washing dirty product.
I’ve seen some of the leaked emails.
I know the mentality.
These traders aren’t idiots.
They’re extremely smart.
They knew $116k wasn’t buying world-class environmental treatment.
They hoped:
- It would be dumped somewhere out of sight
- Nobody would connect the dots
- It would disappear in the noise of a developing country
They were wrong.
The CEO and several executives were arrested in Côte d’Ivoire.
Executives were jailed and attacked by fellow inmates.
Trafigura ended up paying close to $200 million to secure their release and settle with authorities.
Did the money really reach the victims?
That’s another story…
Why Commodities Attract (and Produce) Shady Behavior
Let’s zoom out.
Why is the commodity world so repeatedly stained by scandals?
Three structural reasons:
1. Governments Are Involved in Extraction
Natural resources — oil, gas, minerals, metals — are:
- Politically sensitive
- Often owned or controlled by the state
- Strategic for national budgets
Whenever government is deeply involved, corruption risk goes up.
Licenses, contracts, export rights, tax “discussion” – all become negotiation points.
2. It’s a Low-Margin Business
Commodity trading is, structurally, a low-margin game.
If your margin is 1%, and you manage to push it to 2%, you’ve just doubled your profitability.
So:
- Any small edge matters
- Legal, gray, or illegal
- The temptation to “bend” for that extra 0.5–1% is enormous
For weak people, or people under huge P&L pressure, that’s all it takes.
3. It’s International and Jurisdiction-Hopping
Everything is cross-border:
- Goods move
- Contracts span multiple jurisdictions
- Entities sit in different countries
- Money flows through layered structures
That makes it easy to:
- Play one jurisdiction against another
- Hide accountability
- Exploit differences in regulation, enforcement, and transparency
Put these three together:
State involvement + low margins + cross-border complexity
= Perfect cocktail for bad behavior.
So… Is Everyone in Commodities Evil?
No.
This is the important nuance.
I know a lot of people in this industry:
- Owners
- Traders
- Operators
- Logistics people
Many of them:
- Don’t bribe
- Don’t dump toxic waste
- Don’t rig benchmarks
And they still make good money and live great lives.
Yes, the industry is structurally exposed to:
- Corruption
- Regulation arbitrage
- Temptation to cut corners
But you still get to choose:
- Which lines you won’t cross
- What kind of deals you’ll walk away from
- What kind of firm you’ll build or work for
Humans are messy.
Good people do bad things.
Bad people sometimes do good things.
The point is not to pretend the industry is clean.
It’s to go in with your eyes open, and with a moral code you’ve chosen yourself.