KPMG finds 200 dodgy transactions at oil trader ZenRock

15 July 2020 2 min. read

Supporting a police investigation into charges filed by HSBC, KPMG has found more than 200 questionable transactions in the trade and financial activities of Singapore-based oil and commodities giant ZenRock. KPMG Services has now been appointed the judicial manager at ZenRock.

HSBC is ZenRock’s principal creditor, and filed charges of fraudulent transactions against the company back in May. KPMG, a leader in audits and investigations, was brought on board for the investigation, which involved a comprehensive review of documents and interviews with staff at the oil and commodities firm.

The Big Four accounting and advisory firm found suspicious transactions relating to two companies in particular – Huitongrong International and Shenzhen Qianhai Jin Rong Petrochemical Trading. The former has no valid address, while the latter is registered only with an address. This is in addition to duplicate invoicing found in ZenRock's records that involved substantial cash transactions.

ZenRock has now been placed under judicial management – a type of administration where control of the company is given to a third party. KPMG Services Singapore partners and restructuring experts Martin Wong, Ai Ling Toh and Bob Yap have now stepped in to take over the company.KPMG finds 200 dodgy transactions at oil trader ZenRockStraits Times viewed the report filed by the three executives last Thursday, which highlighted the state of affairs at ZenRock and called for judicial management. The report indicated that the financial situation was dismal, and that heavy cuts to staff and operations were being administered to save costs.

“Given the nature of the allegations in the judicial management application and the publicity... a large majority of counterparties and banks have understandably been reluctant to continue trading with ZenRock, and it is for this reason that all of ZenRock's trade contracts, (except) one term contract, have been terminated,” said the report.

The judicial managers have made clear that “only a fraction” of ZenRock’s operations will survive this fiasco, with few long-term hopes. For now, it is important to keep the ship steady to ensure that inventory sales are completed, while the option of a management buyout of ZenRock Europe by venture partner Mark Papallo is also being considered.

ZenRock’s debt stands at over $165 million, £50 million of which is owed to HSBC. The lender got involved in May after poor performances at ZenRock since the start of the year, the sudden departure of Chief Financial Officer Stanley Chan Chai Lai and a number of other questionable developments at the firm.