Invest1 publisher3 min readPublished
1MDB liquidators sue DBS for the full S$1.298b traced through Eric Tan's five accounts
Liquidators of four collapsed companies want back roughly every dollar that moved through their DBS accounts during the 1MDB thefts of 2013 and 2014, about US$1.03bn. The case sits in Singapore's High Court.
The Investor · Invest desk
What happened
- Liquidators of four companies linked to the 1MDB scandal have filed a S$1.298 billion claim against DBS Group Holdings, about US$1.03 billion, in Singapore's High Court.
- The liquidators allege the transfers had no legitimate commercial purpose and were eventually routed on to various third parties.
- DBS, in a filing dated around September 9 or 10, rejected the allegations, said it intends to defend vigorously and confirmed it has set aside no provisions for potential losses.
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Why it matters
- exposure Because nothing is reserved, any adverse outcome reaches DBS shareholders as a fresh charge in one reporting period instead of a top-up to an existing provision.
- precedent Default judgments against a proxy have already been obtained, so a civil claim aimed at the receiving bank shows liquidators elsewhere a route to a defendant that can actually pay.
- decision DBS has chosen to litigate in a matter where Malaysia's settlement with Goldman Sachs at US$3.9 billion is the visible market price for buying out 1MDB liability.
- constraint Without DBS earnings, capital or the MAS penalty amounts in the record, outsiders cannot size this claim against the bank's capacity to absorb it.
The claim is sized to the flow, not to what the bank made on it. Liquidators Jason Aleksander Kardachi and Karnjote Singh want S$1.298bn, about US$1.03bn [1][4], and the 1MDB Asset Recovery Taskforce puts more than US$1bn of money misappropriated from 1MDB and the related entity SRC International through those same four companies in 2013 and 2014 [5]. So the ask is roughly one dollar of damages for every dollar traced [19]. The two headline figures imply about 1.26 Singapore dollars to the US dollar [16].
Five accounts, all opened in 2013, all with the Malaysian national Eric Tan as sole beneficial owner and signatory [6]. Tan is a known close associate of Jho Low [3], has been identified in recovery proceedings as a proxy, and already has default judgments against him [11]. Jho Low himself has been charged in Malaysia and the US and remains a fugitive [10]. The liquidators have now named the defendant with a balance sheet.
DBS has reserved nothing. In a filing dated around September 9 or 10, according to Crypto Briefing's account, the bank said it intends to defend vigorously against the claims and has not set aside any provisions for potential losses [8]. The whole S$1.298bn therefore sits outside the accounts until a judgment or a settlement puts some of it in. The report does not give DBS's earnings or capital, nor the size of the penalties the Monetary Authority of Singapore imposed on the bank for anti-money-laundering control failures on 1MDB-linked transactions [22][13], so the claim cannot be scaled against a quarter's profit from this material.
There are reference prices for ending 1MDB exposure. Goldman Sachs agreed to pay Malaysia US$3.9bn over its role in raising funds for 1MDB through bond offerings [14], and US authorities put the total siphoned from the fund at about US$4.5bn [9]. Against those, the DBS claim is about 26% of the Goldman figure [18] and about 23% of the total [17]. Goldman settled with a state; this action is brought by liquidators recovering for four corporate estates [1]. Singapore has already shut BSI Bank and Falcon Private Bank over the scandal and prosecuted multiple bankers [12].
A dismissal vindicates the zero provision and costs DBS legal fees. A settlement lands as a new expense in whichever quarter it is signed, with no reserve to absorb it. A finding of liability for even part of the traced flow puts an unbudgeted number into one set of accounts, and the bank has told the market it does not expect that. My read, held loosely because one publication carries the filing detail [21], is that the middle outcome is the one to plan around, and the counter belongs in the same breath: a liquidator's pleading set at the size of the traced flow is a price asked, and the estates pay almost nothing to ask it [19]. The next disclosure that carries a provision is the one that tells you DBS has changed its own view.
What to watch
- Whether DBS's next set of accounts carries any provision against the claim, which would signal the bank has revised its own probability of loss.
- Whether the liquidators file parallel claims against other banks that received the same 2013 and 2014 transfers.
- Whether the Monetary Authority of Singapore comments on or revisits its earlier anti-money-laundering findings against DBS now that the conduct is before a court.