OK Lim, the founder of collapsed Singapore-based oil trader Hin Leong, has been jailed for 17-and-a-half years for defrauding the firm's principal creditor, HSBC, and abetting forgery.

As part of Lim's fraudulent operations, he ordered a company executive to forge sales documents so Hin Leong could fraudulently apply for letters of credit (L/Cs) and accounts receivable financing from banks

Risky trading practices

The 82-year-old former oil trading and tanker tycoon was charged with multiple counts of fraud and forgery. Lim admitted to directing the concealment of losses and other fraudulent practices.

The fraud unravelled as a combination of risky trading practices, concealed losses, and fraudulent accounting.

Hidden losses

Hin Leong concealed US$800 million in trading losses over several years, which were the result of risky bets on oil prices. The losses were hidden from banks and creditors through falsified financial records.

The company issued fake invoices and forged documents to secure L/Cs and other financing from banks. It overstated its inventory of oil to appear solvent.

Dubious dividends

Lim reportedly directed the company to take out unauthorised loans to maintain liquidity and cover trading losses.

Despite mounting losses, the company distributed dividends to its owners, further draining its finances.

Two dozen banks exposed

Hin Leong had over US$3.85 billion in debt to nearly two dozen banks, including major institutions like HSBC, ABN Amro, and DBS.

Lenders faced significant losses, with several banks writing off hundreds of millions of dollars in bad loans.

The scandal prompted scrutiny of the oil trading sector and calls for greater regulation and transparency in trade financing while the collapse marked the end of one of Singapore's most prominent family-run businesses and highlighted the risks of poor governance in the commodities trading industry.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.