SINGAPORE – Singapore prosecutors on Tuesday opened the criminal trial of insolvent Hin Leong founder Lim Oon Kuin, better known as O.K. Lim, who faces a total of 130 charges involving US$2.7 billion (S$3.6 billion) in alleged fraudulent loans disbursed.

In what they called “one of the world’s largest collapse of an oil trading firm”, prosecutors alleged that 16 banks in Singapore have suffered US$291.9 million in “actual monetary loss” out of the US$2.7 billion in loans that they were allegedly duped into extending to Hin Leong by Lim.

The losses are part of the alleged US$3.5 billion debt owed by Hin Leong to 23 banks.

On Tuesday, prosecutors proceeded on three of the 130 charges – two cheating charges and one of instigating forgery for the purpose of cheating. The remaining 127 charges will be dealt with later.

If Lim is convicted, these will likely be taken into consideration for the purposes of sentencing.

The 81-year-old former oil tycoon, who pleaded not guilty in Mandarin to the three charges, was allowed by the court to sit throughout the trial, as he is unable to stand due to medical issues.

According to the prosecution’s opening statements, Lim, through his employees, had cheated HSBC by claiming that Hin Leong had entered into two contracts to sell oil to China Aviation Oil (Singapore), or CAO, and Unipec Singapore, and submitting two invoice financing applications premised on those transactions.

In fact, the two transactions were complete fabrications concocted on Lim’s directions, and the invoice financing applications were supported by forged or fabricated documentation.

As a result, HSBC was dishonestly induced into disbursing US$111.6 million to Hin Leong, prosecutors said.

Specifically, on March 19, 2020, two accounts executives of Hin Leong’s “banker” department – Ms Hng Shiau Siang and Ms Soh Bee Feng – sent e-mails to HSBC’s commodity and structured trade finance department in support of a discounting application concerning a sale of oil by Hin Leong to CAO.

The firm was to pay US$56 million to Hin Leong on April 17 that year.

Discounting refers to accounts receivable financing, where a seller “sells” unpaid invoices to a financial institution and typically receives a slightly discounted upfront payment. This means that the seller would receive payment from the buyer only at a later date.

If the discounting application was approved, HSBC would pay Hin Leong the invoice amount and charge a fee for the transaction.

But the CAO transaction did not exist, and Hin Leong’s application was supported by alleged false documents e-mailed to HSBC.

Further, on March 20 and 23, 2020, Ms Soh allegedly sent e-mails to HSBC in support of another discounting application concerning a purported sale of oil by Hin Leong to Unipec, for which Unipec was to pay US$55.8 million to Hin Leong on May 4, 2020.

Again, this transaction did not exist, and the application was supported by forged or false documents e-mailed to HSBC.

On April 8, 2020, Hin Leong notified HSBC that it was facing liquidity issues and requested a standstill agreement with its lenders.

On April 12, Lim and his children, Ms Lim Huey Ching and Mr Lim Chee Meng, held a teleconference call with HSBC and claimed that due to “miscommunication” within Hin Leong, the discounting applications for oil sales to CAO and Unipec had been mistakenly submitted to HSBC when, in fact, the deals had not materialised.

On April 20, HSBC wrote to CAO and Unipec, notifying them of the discounting applications submitted by Hin Leong and demanding payment of the outstanding sums under the respective invoices.

But CAO and Unipec said that they had not entered into these alleged transactions with Hin Leong and had no record of them. HSBC then lodged a police report on April 21, 2020.

The five-strong prosecution team, led by Deputy Chief Prosecutor Christopher Ong, has lined up 28 witnesses, including Hin Leong employees Serene Seng Hui Choo and Freddy Tan Jie Ren, as well as representatives from CAO, Unipec, Universal Terminal Singapore Services and Ocean Tankers.

The first witness, Ms Chua Pei Pei, HSBC’s senior vice-president of commodity and structured trade finance in Singapore, testified on e-mail correspondences between Hin Leong and the bank relating to the alleged forged documents, and on events leading up to the bank’s police report.

When asked by the prosecution if HSBC received any payment of the US$111.6 million it disbursed to Hin Leong, Ms Chua said the bank “did not, but there was some offset of funds from HL’s account with the bank”.

But she added that she could not recall the exact amount.

Ms Chua will be cross-examined on Wednesday by Senior Counsel Davinder Singh, who represents Lim.

The criminal trial before Principal District Judge Toh Han Li is expected to end on July 20 following 49 days of hearings, subject to developments in the trial.

Meanwhile, The Straits Times understands that the trial of a civil suit brought by the liquidators of Hin Leong against the Lim family is expected to start on Aug 10 in the High Court.

The liquidators in May 2021 succeeded in obtaining a Mareva injunction to freeze the Lim family’s assets worldwide up to a value of US$3.5 billion.

In August 2020, the then judicial managers sued to force the Lim family to repay the US$3.5 billion debt and US$90 million in dividends they allegedly paid themselves, even though their firm was insolvent.

The judicial managers alleged that the Lim family had breached their fiduciary duties as directors and engaged in fraudulent trading.

The asset freeze order application was made to ensure that there were enough proceeds for the liquidators to enforce against, should they win the lawsuit.