This was revealed by Tony Pua, who is a special officer to the Finance Minister Lim Guan Eng, in an article published by the BBC.
"We were giving money out, to a Chinese company, and we suspect this money was being funnelled to parties related to the previous administration," Tony Pua told the British media company in an interview.
The BBC drew links to the Finance Ministry's announcement on July 6, suspending three big contracts with Chinese companies.
Two of them were (petroleum-related) pipeline schemes that were handled by a MOF-linked company called Suria Strategic Energy Resources Sdn Bhd (SSER).
Both projects amounting to RM9.41bil were awarded to China Petroleum Pipeline Bureau (CPPB) on Nov 1, 2016 during former premier Datuk Seri Najib Tun Razak's trip to China.
The BBC reported that even though only some 13% of work on the two projects had been completed, RM8.25bil (or 88% of the total project value) had been drawn down and paid out to CPPB.
Tony Pua, who is also Damansara MP, told the BBC that building work had not even started and only consultancy studies had been completed so far.
"The entire project smelt like a scam. [There were] clearly elements of money laundering taking place," he said.
According to Pua, the Finance Ministry believes that the money was being used to cover debts linked to 1MDB.
CPPB reportedly did not answer e-mails regarding Pua's allegations, but the Chinese embassy in London gave its response.
"We have noted the relevant report. China has all along conducted economic, trade and investment cooperation with Malaysia, as well as other countries, with the principle of mutual benefit and win-win outcomes," said a spokesman.
SSER was set up on May 19, 2016 as a wholly owned unit of Minister of Finance Inc, with the specific intent to undertake the multi-product pipeline (MPP) and Trans-Sabah Gas Pipeline (TSGP) projects.
The MPP involved a 600km multi-product petroleum pipeline connecting Melaka and Port Dickson to Jitra, Kedah, costing RM5.35bil.
The TGSP involved the construction of a 662km gas pipeline costing RM4.06bil from the Kimanis Gas Terminal on Sabah's west coast to Sandakan and Tawau on the other side of Sabah,.
In previous reports, Lim said he was told by Treasury officials that SSER was an off-shoot of the same people behind SRC (Strategic Resources Corp International).
The president of SSER, Datuk Mohammed Azhar Osman Khairuddin, was a board member of Putrajaya Perdana Sdn Bhd.
Putrajaya Perdana is a company directly linked to Low Taek Jho – better known as Jho Low – the main figure authorities are seeking in their investigations into the RM35bil of debts accumulated by 1MDB and US$1bil (RM4.3bil then) of liabilities in SRC.
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