The oil trader's judicial manager PwC is seeking to recover $3.5 billion and another $90 million in dividends from the embattled oil trading firm's founder and his two children.

Legal action has been taken by PwC against Hin Leong founder Lim Oon Kuin, his son Evan Lim Chee Meng and his daughter Lim Huey Ching, who are both executive directors at the company, of fraudulent trading and breaching their fiduciary duties as directors, «The Straits Times» reported on Tuesday.

The trio are accused of «deliberately concealing [Hin Leong's] losses and portraying it as a profitable company when in fact it was massively insolvent,» the report (behind paywall) said. The Lim siblings also «knowingly participated in the creation of documents for 780 fictitious swap trades with various counterparties,» which were used to conceal Hin Leong's losses and give the false appearance that payment was received for fictitious swap trades, the suit added.

According to the suit, the outstanding amount of $3.5 billion are Hin Leong's debts, which the Lim family are personally responsible for, without limitation of liability,» as PwC says the company has been insolvent since the financial year ended October 31, 2012.

Rehabilitation Prospects Dim

A recent report by authored by PwC’s Chan Kheng Tek and Goh Thien Phong said that existing assets at Hin Leong – totaling just $257 million – cover only a fraction of its liabilities and that rehabilitation prospects were slim for the oil trader as a standalone entity. 

The oil trader overstated the value of assets by at least $3 billion by transferring money between bank accounts to create a false impression that accounts receivables were collected when no payments was actually received, according to a report 

Banks Exposed 

A total of 23 banks reportedly lent a total of $3.85 billion to the oil trader. Thus far, HSBC, DBS, OCBC, Bank of China, Societe Generale and Standard Chartered have been named as the largest lenders to Hin Leong. HSBC is reportedly believed to have the largest exposure at $600 million.

Hin Leong also reportedly did not disclose $800 million of losses through futures trading.