High Court judge Mr Justice Phillips reserved judgement in the case, one strand in a web of legal actions filed in the wake of the probe which was launched in May by Chinese authorities into suspected fraud at China's Qingdao port, the world's seventh busiest, and nearby Penglai.

Citigroup and Mercuria Energy Trading Ltd had a close business relationship but turned on each other during a frantic several weeks after the suspected fraud was uncovered, seeking to shift financial responsibility onto each other, the court heard last week.

China has been investigating whether private metals trading firm Decheng Mining and its related companies used fake warehouse receipts to obtain multiple loans secured against a single cargo of metal, including metal owned by Mecuria.

Mercuria held copper and aluminium in Chinese warehouses and agreed a series of deals that were effective loans from Citi using the metal as collateral.

Under the repurchasing agreements, or repos, Citi agreed to purchase metal from Mercuria before selling it back at a slightly higher price to include interest on the effective loans.

The two groups were in the midst of several repo deals when the potential fraud in China was uncovered in warehouses in both Qingdao and Penglai. Citi demanded early repayment of the repos and Mercuria refused.

Meanwhile the Chinese authorities imposed a lockdown on parts of the two ports where the metal is held, preventing anyone, including Citi, Mercuria and the warehouse operators, from accessing the material, court documents said.

(Reporting by Eric Onstad and Jan Harvey; Editing by Veronica Brown and Greg Mahlich)