J Trust Asia Loses Bitter Battle in Singapore Court

Years-long squabble with motorcycle hire purchase firm ends in defeat

The Singapore-based J Trust Asia Ltd has lost the latest round in its bitter corporate squabble with Group Lease Holdings Pte Ltd., with a Singapore court dismissing a suit alleging fraud on the part of eight defendants and seeking millions in damages and repayment.

In dismissing the suit, Singapore High Court Judge Choo Han Tek gave an indication of just how acrimonious the case is, noting that shortly after he had concluded testimony and reserved judgment for later, “the lawyers for the plaintiff and the first and second defendants began a long and protracted exchange of acrimonious letters and copying them to the court until I ordered them to desist.”

The exchanges between the two sides, running to 70 pages, the judge said, “were rude and provocative letters oozing venom at every turn and achieved nothing but the death by poison of all that is gracious and noble in the craft of advocacy.”

Both companies have backgrounds that can only be described as controversial. J Trust Asia is a unit of the Japan-based financial conglomerate J Trust Ltd, whose major shareholders in the past have included the Kirkland, Washington-based Taiyo Pacific Funds LLP, whose former chief investment officer was Wilbur Ross, President Donald Trump’s commerce secretary. The California Public Employees Retirement System, or Calpers, was also brought in by Taiyo Pacific along with Invesco, its ultimate parent. Other investors include BlackRock, the world’s biggest asset management firm, Fidelity Investments and Dimensional Fund Advisers.

J Trust Co.’s stock ownership appears to be intertwined in a maze of cross shareholdings with Group Lease as well as APF Financial, Showa Holdings Ltd, Wedge Holdings Co., Ltd, PT Bank JTrust Indonesia TBK in addition to Group Lease Holdings Pte Ltd (Singapore) and the foreign investors. It seems reminiscent of Chief Executive Officer Nobuyoshi Fujisawa's five-year stint running Livedoor Credit, which collapsed in 2006 in one of Japan’s biggest fraud cases. Its founder, Takafumi Horie, was jailed.

Group Lease is a Thailand-based motorcycle hire purchase company that was a stock market darling until Thai officials accused it of manipulating the Thai stock market via misleading announcements.

The two sides, whose financial dealings were closely intertwined for several years, have sued each other in Tokyo, Bangkok, Singapore, Cyprus, Hong Kong and the British Virgin Islands, with J Trust’s CEO Nobuyoshi Fujisawa filing for damages, compensation and criminal proceedings against Group Lease and its embattled former chairman and CEO, Mitsuji Konoshita. Other defendants are Cougar Pacific Pte Ltd., Aref Holdings Ltd., Adalene Ltd., Bellaven Ltd., Baguera Ltd and an individual, Yoichi Kuga. Separately, J Trust Asia is suing Kuga, the representative director of Kuga Corporation Co., Ltd, for damages equivalent to ¥7.5 billion (US$68.2 million).

According to the judgment, which was handed down on February 12, J Trust injected at least US$210 million into Group Lease from 2015 to 2017 in the form of three convertible bonds. J Trust now claims it made its investments “as a result of the practiced fraud and conspiracy of Konishita and the other defendants, and that Konoshita was the mastermind behind the fraud."

J Trust sought to prove, among other things, that Group Lease “roundtripped” millions of dollars via circuitous routes through friendly parties and ultimately returned the money to Group Lease.

Certainly, the money passed through a bewildering series of transactions, including the purchase of two villas in Cyprus, one of which was occupied by Fujisawa when he applied for Cypriot citizenship. Although J Trust argued the money was supposed to be earmarked for Southeast Asian business dealings, Group Lease also bought a bakery in Cyprus and other businesses.

The judge, in fact, noted that “the loans were undoubtedly unusual, but the fact that they might have raised questions at some appropriate level is different from using that as a basis to allege fraud. At one point, Kuga acknowledged that loans allegedly for the development of land in Brazil “had not been used for this purpose.” In fact, the value of the Brazil land itself “was also in doubt.”

The borrowers, according to the judgment, “had no substantial commercial activity, or at least none that would justify the loans, and were incorporated shortly before the loans were made.”

An expert witness hired by J Trust alleged that the rate of return on these businesses was so low that they made no commercial sense.

Nonetheless, the judge ruled, “I find that the claim of deceit against GLH and Konoshita is not made out. It requires the court to accept all of [J Trust Asia’s] submissions and find an extensive long-term plan to defraud investors.” The loans, he said, “though suspicious, could be explained as advanced on a goodwill basis between Konoshita and the borrowers.”

More than US$250 million seems to have been diverted from J Trust to Group Lease entities and back out again to Cyprus through Singapore-led mandates mutually agreed by Fujisawa and Konoshita in the form of US$210 million of convertible bonds and loans. Sources say that two of the Cypriot entities known as AREF Holdings and Adalene Ltd were created and incorporated through a mysterious facilitator vehicle known as Fidescorp Limited (Cyprus) run by Savvas Pogiatzis, whose father-in-law is believed to be Demetris Syllouris, the current president of the Cypriot parliament.

J Trust Asia's overwhelming loss in Singapore spells trouble for its other lawsuits against Group Lease in Hong Kong, the BVI and Cyprus. This loss severely weakens the chances of J Trust Asia ever seeing US$250 million returned to it. This could be the final nail in the coffin in a pending potential insolvency of J Trust in Japan sharply reminiscent of the Livedoor Credit and Takefuji bankruptcies in which Fujisawa played a heavy hand.

*This story originally carried a reference to a "pump and dump" short-selling scheme, a short-selling syndicate, and to unethical behavior from one or more investment firms. That reference was untrue and incorrect. Asia Sentinel regrets the reference.