Oil trading giant BP has denied allegations by Bank of China that it engaged in fraudulent transactions with disgraced oil trader Hin Leong, after the bank filed a lawsuit seeking to claw back US$125.7mn from the company.

In a lawsuit filed with the Supreme Court of Singapore, the bank says that BP withdrew that sum based on three letters of credit that supported a circular trading arrangement established in the early months of 2020.

According to court documents seen by Bloomberg, Hin Leong is accused of forging documents showing that it sold – then immediately re-purchased – 1.5 million barrels of gasoil to and from BP.

Bank of China alleges that no real-world transaction took place, and the arrangement was a “fictitious purchase scheme conspiracy” set up to boost Hin Leong’s liquidity in the face of serious concerns over its financial health.

“The forged documents enabled [Hin Leong] to mislead banks into extending financing to it and also acted as supporting documentation for fictitious gains or profits,” it says.

A spokesperson for BP tells GTR: “BP strongly refutes the allegations of Bank of China and will defend its position. As the matter is ongoing, BP cannot provide any further comment.”

Bank of China is also seeking a repayment of around US$187mn from Hin Leong founder Lim Oon Kuin for deals involving BP, as well as overdue payments on short-term trade credit facilities.

Bloomberg reports that Bank of China was alerted to the possibility of fraudulent trade transactions by Hin Leong’s judicial managers PwC, appointed after the company collapsed in April this year.

It is likely those trades came to light only after a June report from PwC which accused Hin Leong of widespread and systematic trade finance fraud, as GTR analysis finds BP is not mentioned as a party nor Bank of China as a creditor in those documents.

It is not known whether that means Hin Leong’s outstanding debt is higher than the US$3.5bn accounted for in that report.

PwC’s findings sent shockwaves throughout the commodity finance industry, revealing that the trader had forged documents in order to obtain duplicate financing on the same invoices – as well as on trade receivables and inventory finance arrangements – on a vast scale.

The lawsuit follows HSBC charges against Lim, with the bank seeking to recover over US$85mn. In that case, Lim says forged documents were issued “mistakenly” and without his knowledge, and so he does not bear responsibility for HSBC’s losses.

HSBC did not comment when contacted by GTR.