As Star Entertainment is rapidly running out of both cash and options for survival, the corporate legal battle of the decade begins on Monday to determine whether Star’s previous board should have known earlier about the scandals that have torched more than $4 billion worth of shareholder funds.

Justice Michael Lee – after a one-year delay thanks to the Bruce Lehrmann defamation trial – will preside over Federal Court civil proceedings between the Australian Securities and Investments Commission (ASIC) and 10 former Star board members and executives for breaching their duty to act with care and diligence.

ASIC has accused them of not paying sufficient attention to the risks of money laundering and criminal association that have unravelled the casino operator. There could be profound implications for corporate Australia, pertaining to how much trust directors can place in management assurances that a business is running well.

“The real issue they’re tackling is the ability of the board to say they didn’t know,” says corporate governance expert Helen Bird. “That provision is really being tested for the first time.”

The trial might last longer than the casino operator, which lost its casino licences and is running out of cash following successive probes into the money laundering and criminal association issues.

“You would want your board to ask these hard questions because look where it led to ... the debacle that is Star to this day,” Bird says. “You have got to wonder if they’d been more effective with these issues earlier, some of this could have been avoided.”

ASIC already has its first scalp.

In a federal courtroom on Wednesday, Star Entertainment’s former finance boss, Harry Theodore, broke ranks with his former colleagues and settled with ASIC on charges that he knowingly misled NAB about its ATMs being used to funnel more than $900 million into Star’s Sydney casino.

“ASIC and Mr Theodore have agreed terms of settlement, but the agreed penalty hearing is yet to occur,” an ASIC spokeswoman said.

The admission by Theodore, who faces a fine and ban from managing a corporation, is not a big surprise. At the 2022 hearing into whether Star should retain its casino licence, he admitted to acting unethically when approving communications from the casino to NAB that tried to disguise banned gambling transactions as hotel expenses.

There is some solace for the remaining 10 former Star executives and board members facing charges that they were not sufficiently attentive to these risks.