Monday, October 26, 2020

Singapore police raids oil trader ZenRock following HSBC allegations of fraud

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The Singapore Police Force has raided ZenRock Commodities Trading following allegations from HSBC that the company was involved with a number of “dishonest” transactions.

HSBC recently filed an application in Singapore’s High Court to replace ZenRock’s management over non-payment of dues and other issues, including the use of the same cargo to secure financing from multiple banks.

At a hearing on Friday (7 May), the High Court appointed KPMG executives as interim judicial managers to oversee ZenRock’s transition to new management.

According to Bloomberg, Singapore Police raided ZenRock’s offices after the hearing to look into allegations HSBC filed with the CAD (Commercial Affairs Department) more than one week earlier on 28 April.

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The bank reportedly said it had reason to believe ZenRock provided false and/or fraudulent transaction documents in its loan applications, and that the company may have wrongfully diverted payment of funds that should have been paid directly to HSBC.

The bank also said it lost confidence in ZenRock’s management and its ability to repay its debts, amounting to about USD 165 million – USD 49 million of which was to HSBC.

“The company’s inability to raise fresh financing has exposed certain trade practices by the company which appear on their face to be shams, or at the very least, extremely suspicious,” HSBC had said in its court filing, as reported by the FT.

In one of the transactions, ZenRock was said to have used a letter of credit to finance the purchase of 920,000 barrels of crude from Azerbaijan’s state oil company Socar, which ZenRock planned to sell on to the trading arm of France’s Total.

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Under the deal, the payment from Total was supposed to be deposited with HSBC to pay off the money drawn via the letter of credit. However, HSBC later discovered it had been diverted by ZenRock to pay off another of its loans with BOC (Bank of China).

“The company’s conduct displays a wanton disregard for its contractual obligations and a willingness to fabricate documents in order to support its attempts at raising financing,” HSBC’s court filing said. “The company’s management simply cannot be trusted and should be replaced immediately with independent professionals.”

Original article on Regulationasia

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