(Bloomberg) -- JPMorgan Chase & Co. owned the London Metal Exchange nickel contracts that turned out to be backed by bags of stones rather than metal, according to people familiar with the matter.

The LME last week announced it had canceled nine nickel contracts — worth about $1.3 million — after discovering “irregularities” at a certain warehouse, which Bloomberg has reported was owned by Access World. The news has been met with shock in the metals world, because LME contracts are generally viewed as beyond question.

JPMorgan was the owner of the nine invalidated contracts, according to people familiar with the matter. The bank registered the bags of material as being deliverable against LME contracts in early 2022, said the people, who asked not to be identified discussing private information.

There’s no suggestion that JPMorgan did anything wrong. The material was already inside Access World’s Rotterdam warehouse when the bank bought it several years ago, according to one of the people.

Read: LME Rocked by New Nickel Scandal After Finding Bags of Stones

Still, its central role in another nickel crisis will be a headache for the bank. JPMorgan’s commodities business has been under scrutiny since last year’s nickel short squeeze on the LME, where it played a key part as the largest counterparty to Chinese tycoon Xiang Guangda’s short position.

JPMorgan declined to comment. The bank’s ownership of the nine invalidated nickel warrants was first reported by Fastmarkets. 

Access World said it is inspecting the “warranted” bags of nickel briquettes at all its locations, but believes that the issue that led to the nine warrants being suspended “is an isolated case and specific to one warehouse in Rotterdam.”

It’s not clear whether the bags ever contained nickel, and whether the issue is a result of error, theft or fraud. Under the LME’s rules, warehouses are responsible for inspecting and verifying metal. Warehouses are required to hold insurance, while physical metal traders typically are insured against risks such as theft.

The discovery has set off a wider scramble across the metals world, with warehouse companies racing over the weekend to re-inspect and re-weigh thousands of tons of metal after the LME asked them to verify all the nickel currently on warrant. 

The LME has also been carrying out its own inspections in Europe and Asia, one of the people said. So far, the mass inspection has found no other issues with LME material, the person said.

JPMorgan is the leading bank in metals markets, but it has been at the center of several high-profile crises in the past year. It reported a $120 million loss related to nickel a year ago, in the wake of the short squeeze centered on Xiang and his company, Tsingshan Holding Group Co. 

It also had a financing relationship with Chinese copper trader Maike Metals International Ltd., which ran into trouble last summer and last month said it was working on a debt restructuring. Bloomberg reported last year that JPMorgan was reviewing its commodity exposure.

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