Red Kite Chief ‘Reassured’ By Metals Probe

Jun 13 2014 | 10:39am ET

RK Capital Management is confident that a metals-financing scandal is not a sign of deeper problems in the metal warehousing industry.

Firm founder David Lilley told the International Derivatives Expo this week that the failure by Chinese investigators to discover any further malfeasance in Qingdao is good news for metals traders. Authorities in that city are looking into whether warehouse receipts could be duplicated to obtain financing on the same metal multiple times.

The nascent scandal “raises a lot of questions about everything else,” Lilley said. But, he noted “every trading company, every bank has been doing a huge amount of due diligence that everything else is OK.”

“I am somewhat reassured by the fact that in that period no other area, no other problem has been uncovered. So, in that regard, I suppose, I think it’s going to calm down and everything’s OK.”

Lilley did end on a cautious note, saying, “you don’t know what you don’t know.”

RK Capital runs the Red Kite hedge funds.

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