In the first such ruling in the city-state over a purely online article, a judge issued a summary judgment against Roy Ngerng, a 33-year-old former government employee.
Ngerng, who writes a blog called Heart Truths, was seeking trial to defend himself but High Court Judge Lee Seiu Kin ruled that there was "no triable defence against the plaintiff's claim".
"There is no doubt that it is defamatory to suggest that the plaintiff is guilty of criminal misappropriation," the judge said in a written ruling.
Ngerng has already admitted that his May 15 blog accusing the prime minister, who is also chairman of state investment fund GIC, of misusing the Central Provident Fund (CPF) was false and without foundation.
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He offered Sg$5,000 as compensation to Lee, who rejected the amount.
GIC is a sovereign wealth fund that manages more than $100 billion of the city-state's foreign reserves. The CPF is the state pension scheme that pools Singaporeans' retirement money.
In June, he successfully raised more than Sg$112,000 through crowdfunding in order to fight the case, with over 4,000 people contributing cash.
"I am currently deliberating with my lawyer M Ravi on the next course of action," Ngerng told AFP after the judgment was released.
"I am disappointed as I have never intended to defame the prime minister. I will still continue to speak up on the CPF and other issues that concern Singaporeans," he added.