SINGAPORE (Apr 16): Midas says a court application has been filed against Jilin Midas Aluminium Industries (Jilin Midas) in China on Apr 2 by a lender called Yu Song.

Although Midas says Yu does not exist in the group’s accounts, the plaintiff has applied to the court in Jilin province to liquidate Jilin Midas, a subsidiary of the group, for unpaid loans amounting to about RMB 34.1 million ($7.13 million).

This appears to be the latest in a string of unauthorised loans taken out by Midas' China subsidiaries which have led to investigations by the Commerical Affairs Department (CAD).

As at Apr 6, Midas' China subsidiaries have been hit by claims of up to RMB 452.2 million in lawsuits by creditors.

See: Midas uncovers yet another unauthorised loan

See also: Midas uncovers another lawsuit against Dalian subsidiary as unauthorised guarantor

See also: CAD launches investigations into Midas

The court has appointed Jilin Province Qiming Bankruptcy Liquidation as the judicial manager to manage the group’s significant and principal operating subsidiary, Jilin Midas.

The board is arranging with the judicial manager to obtain information relating to cash validation, litigations, undisclosed subsidiaries and other relevant information.

In a separate filing, Midas' board says it has obtained bank statements from JMLA for its accounts with China Merchants Bank, Changchun Branch as part of its plans to validate the cash balances at the primary accounts of Jilin Midas, JMI and Jilin Midas Light Alloy Co. (JMLA).

These included statements from Nov 2016 to Apr 3 obtained over the counter by the staff of JMLA; and those from Mar 2017 to Apr 12 obtained over the counter by the board.

From the statements, the board noted discrepancies between balances of statements obtained and the bank confirmation received by its auditors.

The board found that RMB 23 million ($4.8 million) was transferred to Chongqing Huicheng Aluminium, an unrelated company, which was controlled by LakeForest Capital, previously known as Lesen Capital, whose sole shareholder is Chen Chen.

Chen Chen is the nephew of Chen Wei Ping, the group’s former executive chairman.

See: SGX strips Midas chairman Chen and legal representative Ma of their appointments

The purported reason for the disbursement is loan repayment, but the current board notes that no such loan was recorded in the group’s accounts.

In addition, the board also noted that JMLA previously had an undisclosed bank account with the Bank of Jilin, which was opened by Chen Wei Ping on Sept 9 2016, who was then the legal representative of JMLA.

This bank account was not disclosed to the group and to the auditors. It was used to transfer money with the previously undisclosed lender, Jilin Provincial Micro Refinancing Corporation.

The board says it has made a police report in China although the police "could not acknowledge receipt of the report".

Shares of Midas have been suspended since Feb 8. It last traded at 19.2 cents.