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Winson Oil made false representations to two banks when seeking payment for sales to disgraced trader Hin Leong, a Singapore High Court ruling has found. 

The Singapore-headquartered commodities trader had filed lawsuits against Standard Chartered and OCBC, arguing it was owed over US$60mn from the sale of two cargoes of gasoil to Hin Leong in March 2020. Hin Leong collapsed less than a month later amid allegations of rampant trade finance fraud, owing creditors an estimated US$3.5bn. 

The transactions were circular trades, with the goods initially sold by Hin Leong to Trafigura, then onto Winson and back to Hin Leong. However, Hin Leong’s downfall meant it was unable to make payment for its repurchase. 

Standard Chartered and OCBC, which each issued a letter of credit (LC) for Hin Leong’s purchases from Winson, refused to pay, arguing that documents supporting that transaction were fake and no cargoes had actually been shipped. 

Citing evidence from Hin Leong’s interim judicial managers, the court says that goods were shipped aboard two vessels, but had already been sold to other buyers before the transaction involving Winson had been agreed. 

It also says Winson only presented copies of bills of lading (BLs) to the banks, rather than originals, and that those documents appeared to be forgeries signed by Hin Leong employees. 

The court adds that the trader acted fraudulently, finding that it would either have known the transactions were fake or did not believe they were genuine. 

It explains that when Winson was challenged by OCBC on the grounds no physical cargo was shipped – a “serious matter” for an LC-issuing bank – the trader did not enquire why that was the case. Instead, it prepared new invoices and letters of indemnity and sought payment a second time. 

“An honest trader in Winson’s position would have sought to understand why OCBC was saying that… and to check if that was in fact the case,” the ruling says. 

Winson also received no loading documents associated with the shipments, such as an independent inspector’s report or certificate of quality or quantity, and refused to repurchase the cargo to sell to an alternative buyer when prompted by OCBC – even though that may have been in its interest if it previously had title to legitimate goods. 

The trader’s representations to both banks “were thus made fraudulently”, the court rules. 

Winson had argued it was unaware Hin Leong was the original seller of goods when the transactions were agreed, but the court concluded that the circular transaction was “pre-structured… from the start”. 

It notes that worsening market conditions in late March 2020 meant it made no commercial sense for Hin Leong to repurchase the goods from Winson, as it would make a loss of US$0.05 per barrel. 

The transactions were seemingly entered into “purely for financing purposes” on the part of Hin Leong, the ruling adds. 

Winson did not respond when contacted by GTR. Standard Chartered and OCBC declined to comment. 

 

A “vicious cycle” of fraud 

The relevant cargoes of gasoil appear to feature in an interim report by Hin Leong judicial managers PwC, submitted to a Singapore court in June 2020. 

Hin Leong had agreed to sell 780,000 barrels to Unipec in mid-March, supported by an LC issued by Crédit Agricole.

It then obtained financing from Société Générale to sell 780,000 barrels of oil to trading giant Glencore, which it would re-purchase immediately, with LCs issued by Rabobank and DBS Bank. 

BLs used to support all three trading arrangements “bear the same vessel name and aggregate cargo”, and differ only in date. Unipec, Glencore, Trafigura and four banks all since submitted claims to that cargo or requested additional documentation. 

That report found Hin Leong had fallen into a “vicious cycle” of fraud, generating new false transactions to obtain financing to cover earlier losses.  

As well as bank-issued LCs, the trader was accused of forging sales invoices to secure factoring facilities, and overstating inventory balances to secure further lines of credit. 

Hin Leong’s founder, OK Lim, is currently on trial in Singapore along with his two children, with liquidators attempting to force repayment of more than US$3.5bn. 

Meanwhile, Winson is involved in another Hin Leong-related case, with Standard Chartered seeking repayment from Maersk over mis-delivery of a cargo of oil. 

The trader also made headlines in March 2021, when a UN panel of experts alleged it was a “key node” in an oil import network used by North Korea to bypass sanctions – claims the trader strongly denied. 

The UN panel later alleged there were further ties between Winson and the authoritarian state.