Jefferies Financial Group Inc. (NYSE: JEF) is reviewing its exposure to Radiant World, a little-known commodity trading firm that has rapidly become one of the world’s largest iron ore traders.
The review follows Bloomberg News reporting that Vitol Group and Cargill Inc. have stopped trading with Radiant World over concerns about invalid invoices and other documents the company provided to its banks.
Radiant World has denied those allegations, stating that its trading relationships remain uninterrupted, even as major counterparties distance themselves from the firm.
Jefferies’ exposure to Radiant World has declined from its peak and now stands at less than $300 million, according to people familiar with the matter.
The development adds fresh complications to Point Bonita Capital, a Jefferies-managed fund that had already been in the process of winding down following a separate blow-up tied to auto supplier First Brands Group.
Point Bonita investors had been waiting on a final payment when the Radiant World situation thrust the fund back into the spotlight, with the last payment received from the trader approximately three weeks ago.
When Point Bonita executives investigated the delayed payments, they discovered discrepancies in some of the paperwork underpinning its financing arrangements with Radiant World.
In an April letter seen by Bloomberg, Point Bonita had told investors its two biggest exposures were to Glencore Plc and Cargill Inc., when in reality those were invoices owed to Radiant World that the trader had sold on to the fund.
The same pattern had occurred with First Brands, where the fund presented exposure to Walmart Inc. and AutoZone Inc., when it was actually holding invoices those companies owed to First Brands.
At its peak, Point Bonita was run by 15 professionals and managed $3 billion, more than a third of which was tied up in receivables purchased from First Brands and Radiant World.
Since announcing last October that it would allow investors to begin redeeming, the fund’s staff has dwindled to just five people, according to one person familiar with the matter.
Chief Executive Officer Rich Handler and President Brian Friedman addressed the First Brands situation in their annual letter to investors earlier this year, writing, “We take this situation very personally and deeply regret Point Bonita’s involvement in First Brands.”
“There clearly are lessons to be learned, even from an idiosyncratic event such as this, and we will continue to adjust and improve our control regime across our firm,” Handler and Friedman added in the letter.
The latest controversy is part of a broader pattern of trouble within Jefferies’ Leucadia Asset Management division, which managed $65 billion in assets as of the end of February.
In 2024, one Leucadia fund, 352 Capital, sued its former portfolio manager over claims he orchestrated an investment of more than $100 million in Water Station, a suspected Ponzi scheme.
A year later, Jefferies and Leucadia found themselves in a court dispute with hedge fund founder George Weiss after his hedge fund empire teetered on insolvency.
Leucadia was subsequently sued by both a lender and shareholders for investment losses and for allegedly misrepresenting Point Bonita’s risk profile before the First Brands collapse.
At Jefferies’ investor day last October, Friedman acknowledged the mounting incidents, saying, “It troubles us, the coincidence of several of these. It’s causing us to ask questions. It’s causing us to scrutinize.”
As part of efforts to reposition its asset management business, Jefferies announced a deal to acquire a 50% stake in Hildene Holding Co. and has moved to reduce capital allocated to certain funds.
The trade finance sector has been hit by numerous blow-ups in recent years, and the Radiant World situation serves as the latest reminder of the risks embedded in financing commodity trading operations.
