SINGAPORE -- The head of a Chinese family office in Singapore has accused former employees of fraud in a multimillion-dollar case, further tarnishing the reputation of the financial hub's wealth management sector after it was dented by a recent massive money laundering bust.
Zhong Renhai, an "ultra-high net worth Chinese businessman," his Panda Enterprise single family office -- a corporate structure used by the wealthy to manage their own and their relatives' assets -- and Lee Fung International, another company under him, alleged that 74 million Singapore dollars ($55.5 million) had been "misappropriated" from LFI and Panda by his locally based staff, a judgment from Singapore's High Court states.
It showed that four ex-employees of LFI -- who Nikkei Asia understands to all be Singaporeans -- along with an entity in the British Virgin Islands controlled by the four, were bound to a directive last week halting the movement of assets globally, indicating that the court has found sufficient evidence for their assets to need freezing.
"With regard to the [worldwide freezing order], I find that it should remain against all the defendants," the judge of the civil case said in the document. "The claimants have shown a good arguable case."
According to the document, the Chinese businessman discovered the situation in December 2023, which led to the removal of the four by January last year. External forensic accountants later found that SG$74 million had been siphoned from Zhong's accounts.
Among other fraudulent actions cited, three of the defendants were alleged to have taken more pay than they should have from 2019 to 2022. Over the four years, they were shown to have been overpaid by SG$2.93 million, SG$2.67 million and SG$2.76 million, respectively.
"This egregious dishonesty was deliberately done to deceive Zhong," records said.
The records also show that one of the four allegedly fabricated documents to embezzle funds belonging to Zhong to the amount of US$25 million using the Virgin Islands-registered company.
In defense against Zhong's allegations, the former employees argued that one of them had the mandate to decide their salary and bonuses, which Zhong denied, according to the court judgment.
The four had earlier applied to set aside the court's order freezing their assets, alleging "abuse of process" by Zhong, but failed in their attempt.
Nikkei understands that a significant portion of the alleged fraud occurred during the COVID-19 pandemic when the Chinese businessman was unable to be in Singapore.
"The family office staff went rogue," a source close to the case told Nikkei Asia on condition of anonymity. "They were able to exploit the lack of systems and checks."
Zhong's case is the latest known dent in the city-state's reputation as a regional financial hub. The tiny Southeast Asian island nation has in recent years
drawn more single family offices, with their number passing 2,000 at the end of 2024, up from 1,400 recorded a year earlier.
Last year, 10 individuals originally from China who obtained wealth linked to activities such as illegal gambling were
convicted for their roles in a SG$3 billion money laundering scandal that gripped international attention. Six single-family office funds that received government tax breaks were associated with the criminals.
As private asset managers for select groups of related individuals, single family offices in Singapore do not need a license to conduct their activities in the way mainstream commercial banks, for example, need the relevant permits to operate as regulated financial institutions.
The Monetary Authority of Singapore, the national financial regulator, has been tightening oversight on the inflow of foreign private wealth into the country following the SG$3 billion money-laundering scandal.
Last year, the MAS enlisted the help of professional services firms such as accounting giant EY to conduct detailed vetting of high net-worth individuals looking to park assets in the country via family offices.
The regulator also wants these wealth management vehicles to open and keep accounts with MAS-regulated banks, as well as to notify authorities when they start operations in Singapore.
Some industry observers view the structure of single family offices as opaque and therefore more prone to abuse by insiders, although Loh Kia Meng, Senior Partner at law firm Dentons Rodyk, noted that even in the highly regulated area of banks in Singapore, cases of wrongdoing have arisen from time to time.
"You can't have 100% enforcement -- [even] if you look over the shoulder of each single family office," Loh told Nikkei. "Every system has gaps, and if people want to exploit the gaps, they will."
