Hedge fund Elliott Management sues the London Metal Exchange for $456 million over nickel trading fiasco

• Activist hedge fund Elliott Management is suing the London Metal Exchange for over $456 million.
• The commodities trading hub suspended nickel trading in March after prices topped $100,000 a ton.

Elliott Management is suing the London Metal Exchange for $456 million over the commodities hub's suspension of nickel trading in March.

The activist hedge fund, which was founded by billionaire investor Paul Singer, has filed a lawsuit stating the LME unlawfully canceled nickel trades it had made on March 8, after the nickel price surged 250% to above $100,000 a ton.

"When the LME canceled nickel trades on 8th March 2022 it acted unlawfully," an Elliott spokesperson said. "It exercised the powers that it did have unreasonably and irrationally in particular by taking into account irrelevant factors - including its own financial position."

Elliott is suing the LME in the English High Court. Hong Kong Exchanges and Clearing, which owns the exchange, disputes the idea that LME management acted unlawfully.

"It should be stressed that the LME always acted in the interests of the market as a whole," they said in a statement. "Management is of the view that the claim is without merit and the LME will contest it vigorously."

The 145-year-old exchange halted nickel trading for eight days in March during a period of wild price fluctuations.

International sanctions against Russia, a major exporter of nickel, triggered a massive short squeeze that left one Chinese group facing trading losses of over $8 billion as the price more than doubled in the space of a day. The LME then canceled all trades made on March 8.

Elliott isn't the first hedge fund to threaten legal action against the exchange. Cliff Asness, the founder of AQR Capital Management, previously accused the LME of "stealing money from market participants trading in good faith and giving it to Chinese nickel producers and their banks."

In April, the exchange's financial regulators also announced they were launching a review into the "disorderly market" for nickel.

Nickel currently trades at just under $28,000 a ton, and is up 34% year-to-date.

Read more: A Chinese tycoon reportedly got squeezed in the global nickel market and faced billions in losses. Here's how the short squeeze happened and 7 things you need to know about 'Big Shot.'