Singapore Oil Trader Involved in ‘Fraudulent’ Deals, HSBC Says

 Singapore Oil Trader Involved in ‘Fraudulent’ Deals, HSBC Says
  • HSBC said it has reason to believe that ZenRock provided fraudulent transaction documents in its loan applications to the bank.
  • HSBC said it understands that the company’s total debt to institutional lenders stands at about $165 million, according to the documents.
  • HSBC’s allegations come in the wake of some high-profile cases in recent years of banks being hit by traders using the same commodities as collateral for several loans.

 

HSBC Holdings Plc alleged Singapore oil trader ZenRock Commodities Trading Pte Ltd. was involved in a series of  Money heist  (highly dishonest transactions) that included the company using the same cargo of oil to defraud banks, according to court documents seen by Bloomberg.

Europe’s biggest lender filed an application to Singapore’s High Court on May 4 to put ZenRock under so-called judicial management, a form of debt restructuring in which a third party runs the company. The bank said it has lost confidence in the management of the company and its ability to pay its debts to the bank, which amount to almost $49 million, according to the documents.

HSBC said it cannot discuss matters under legal proceedings. Nobody from Singapore-based ZenRock responded to multiple attempts to seek comment via calls and messages.

 

How did ZenRock carry out the fraudulent act?

HSBC said it has reason to believe that ZenRock provided fraudulent transaction documents in its loan applications to the bank. It also said it believes the trader may have wrongfully diverted payment of funds that should have been paid directly to the lender “and/or dissipated these funds beyond the reach of the bank.”

HSBC said it understands that the company’s total debt to institutional lenders stands at about $165 million, according to the documents.

In response to market speculation over its financial status, ZenRock released a statement last month saying it’s not under statutory restructuring or insolvency protection. The Singapore-based company is operational and is working with other creditor banks to negotiate a consensual restructuring, a person said on Wednesday.

HSBC’s allegations come in the wake of some high-profile cases in recent years of banks being hit by traders using the same commodities as collateral for several loans. In one of the industry’s most notable cases, Standard Chartered Plc and Citigroup Inc. in 2014 lost millions after a Chinese metals trader pledged the same stockpile three times.

HSBC and other banks are stepping up efforts to avoid further losses related to commodities trading after the downfall of Hin Leong Trading (Pte) Ltd., the storied Singapore oil trader that owes 23 banks almost $4 billion. HSBC has the most exposure to Hin Leong as part of its $2 billion oil-trading loan portfolio.

The firm posted revenue of $6.15 billion in 2018, compared with $1.24 billion in 2016, according to its latest annual financial statement on Singapore’s accounting regulator website.

 

— With Bloomberg