Rio Tinto and two former top executives were charged with fraud by US authorities on Wednesday, accused of inflating the value of the company's Mozambique coal assets and failing to disclose mounting losses.
The world's second biggest miner vowed to "vigorously" defend the allegations.
The complaint was filed by the US Securities and Exchange Commission in a Manhattan court, Rio said, with the miner, former chief executive Tom Albanese and ex-chief financial officer Guy Elliott charged with failing to follow accounting standards and company policies.
The Anglo-Australian giant bought its Mozambique assets for US$3.7 billion in 2011 and sold them for just US$50 million three years later, forced to write off $US3.0 billion from the value of its investment.
Albanese ultimately lost his job over the issue.
The SEC alleges the company failed to accurately value the acquisition and hid or delayed disclosure of the mounting losses.
"As alleged in our complaint, Rio Tinto's top executives allegedly breached their disclosure obligations and corporate duties by hiding from their board, auditor, and investors the crucial fact that a multi-billion dollar transaction was a failure," said the SEC's co-director of its Enforcement Division Stephanie Avakian.
Fellow co-director Steven Peikin added in a statement: "Rio Tinto and its top executives allegedly failed to come clean about an unsuccessful deal that was made under their watch. They tried to save their own careers at the expense of investors by hiding the truth."
Rio Tinto plc, Rio Tinto Limited, Albanese, and Elliott are charged with violating the antifraud, reporting, books and records and internal controls provisions of the US federal securities laws.
The regulator is seeking injunctions, a return of "allegedly ill-gotten gains plus interest", and civil penalties. It also wants to ban Albanese and Elliott from again serving as public company officers or directors.
According to the SEC's complaint, Rio acquired the Mozambique projects shortly after disclosing huge losses at its previous large-scale acquisition, Alcan.
Both took place under Albanese's leadership.
It claims the African project failed as it was based on the incorrect assumption that Rio could inexpensively mine, transport, and sell large quantities of high-quality coal, chiefly using barges for shipping.
The SEC alleges it suffered setbacks almost immediately, as Rio, Albanese, and Elliott learned there was less coal and of lower quality than expected, and Mozambique had rejected its barge application.
After already impairing Alcan, Rio, Albanese, and Elliott knew that publicly disclosing a second failure would call into question their ability to pursue other long-term, low-cost, and highly-profitable mining assets, it added.
Instead, they are accused of concealing the problems, allowing the company to release misleading financial statements days before a series of US debt offerings.
Rio said the case was flawed.
"Rio Tinto believes that the SEC case is unwarranted and that, when all the facts are considered by the court, or if necessary by a jury, the SEC's claims will be rejected," it said in a statement.