The London Metal Exchange held a board meeting yesterday. The LME is co-operating closely with the Securities and Investments Board in its investigation of the scandal. While the LME would not comment on what was discussed, it is understood the unwinding of Sumitomo's copper positions and the fragile state of the copper market were key topics for debate.
Japan has ditched its previous approach of pursuing only a civil enquiry into the affair, in which rogue trader Hamanaka ran up losses on unauthorised trades of at least $1.8bn (pounds 1.2bn).
Japanese news services said yesterday that the Tokyo district prosecutor's office would investigate whether there was a breach of trust by Hamanaka.
Some market observers fear Sumitomo may eventually lose as much as $4bn.
The Japanese authorities had previously insisted that none of its laws had been broken since the deals in the affair were conducted outside Japan.
As fallen copper trader Mr Hamanaka stayed in hiding, there were reports that he had colluded with Chinese state firms to control the price of copper.
Sumitomo said it would investigate the cartel report and this would be a key issue in meetings with US, British and Japanese regulators. Officials of China's Non-Ferrous Metals Import and Export Corp declined to comment.
Traders said earlier this week that, as far back as 1988, Mr Hamanaka used Sumitomo's huge leverage as the biggest copper merchant, controlling big volumes of stocks, in periodic attempts to ramp prices.
Mr Hamanaka's strategy ran into trouble this year when powerful hedge funds decided that copper around $2,700 per tonne was overpriced and started selling it on the London Metal Exchange, and off the market, to try to force it down and break Mr Hamanaka.
According to reports close to the market, his position had been so strong that George Soros, the hedge fund investor who helped force sterling out of the ERM in 1992, gave up in March.
But sellers led by Herbie Black of Montreal-based American Iron & Metals sold copper again in May.
Reports claimed that Chinese firms with which Sumitomo had joint ventures had a key role. The Chinese knew of Mr Hamanaka's intentions in the market and vice versa. Both parties profited from this relationship, it is claimed.
According to one veteran metals trader, Mr Hamanaka's successful trading over almost a decade on the LME generated substantial profit for Sumitomo. It may have offset losses on a strategy to win market share by selling physical copper in Asia at low prices.
Sumitomo insists that Mr Hamanaka was acting alone, and that senior executives did not provide any authorisation or have any knowledge of his loss-making trades.
A bid to rig the market, even in collusion with the Chinese, need not involve breaking laws, top traders say. But such activities may concern market regulators in the US and Britain's SIB, both of which have sent investigators to Tokyo.