The frauds of 2020 and the retreat of the banks

A year of collapses

The year 2020 was the worst in the modern history of commodity trade finance. The collapse of oil prices in March and April 2020, when the pandemic halted demand, exposed losses and frauds that had been concealed for years at several Asian and Middle Eastern trading houses. Banks found that cargoes they had financed did not exist, that receivables had been sold twice and that the same bills of lading had been presented to several lenders. Bloomberg reported in September 2020 that the scandals at Hin Leong, Hontop Energy and Agritrade International had left global lenders facing potential losses of more than USD 9 billion.¹ None of the main cases involved a Lugano trader. They nevertheless changed the conditions on which every trader in Lugano is financed, because the banks that lost money in Singapore and Dubai were the same banks that served the Swiss market from Geneva.

Hin Leong Trading

Hin Leong Trading, founded by Lim Oon Kuin (known as OK Lim), was one of the largest suppliers of fuel oil in Asia. When it collapsed in April 2020, it emerged that the company had concealed losses of some USD 800 million over several years.² According to press reports, it owed about USD 3.5 billion to 23 banks.³ Prosecutors in Singapore brought more than 100 charges against OK Lim. In May 2024 he was convicted on three counts of abetting the cheating of HSBC and instigating forgery, in connection with transactions of about USD 112 million. In November 2024 the court sentenced him to 17 and a half years' imprisonment. He appealed, and reports at the time indicated that he would not begin serving the sentence before the appeal was decided.⁴ In civil proceedings, he and his two children consented in September 2024 to a judgment of about USD 3.5 billion in favour of the liquidators and HSBC without admitting liability. They were declared bankrupt in December 2024.⁵ At the beginning of 2025 his appeal against the criminal conviction was still pending.

The Hin Leong case was a lesson about the documentary credit itself. Banks had financed purchases under letters of credit that they regarded as almost risk-free. Public Eye observed that HSBC, ABN AMRO and Société Générale lost hundreds of millions through an instrument that was supposed to carry almost no risk.⁶ The credits had been honoured against documents, including letters of indemnity in place of original bills of lading, for cargoes that had been sold several times or had never existed in the quantities stated. The bank deals with documents, and the documents were false.

Notes

1. BNN Bloomberg, "BNP shuts Swiss commodity trade finance team amid frauds", 23 September 2020, https://www.bnnbloomberg.ca/bnp-shuts-swiss-commodity-trade-finance-team-1.1498094. ↩
2. Public Eye, Trade Finance Demystified (above), 11. ↩
3. Dupont, Geneva Solutions, 27 August 2020 (above) (23 banks, losses estimated at USD 3.5 billion). ↩
4. Free Malaysia Today, "Singapore oil tycoon OK Lim sentenced to 17.5 years in prison", 18 November 2024, https://fmtv5.freemalaysiatoday.com/category/highlight/2024/11/18/singapore-oil-tycoon-ok-lim-sentenced-to-17-5-years-in-prison; Maritime Executive, "Hin Leong fraud scandal winds to a close with bankruptcy filing", https://maritime-executive.com/index.php/article/hin-leong-fraud-scandal-winds-to-a-close-with-bankruptcy-filing (conviction in May 2024 on three of 130 charges; sentence by Judge Toh Han Li; appeal pending). ↩
5. Maritime Executive (above); Free Malaysia Today, 18 November 2024 (above) (agreement to pay USD 3.6 billion to the liquidators and HSBC). ↩
6. Public Eye, Trade Finance Demystified (above), 11. ↩

For general information only. This article does not constitute legal or tax advice, does not replace advice on an individual case and creates no lawyer-client relationship. It reflects the legal position as of August 2025.