The head of the Singapore-listed arm of China's main jet fuel importer was arrested by Singapore police after the biggest corporate collapse scandal in the city-state since trader Nick Leeson broke Barings Bank.
China Aviation Oil (Singapore) Chief Executive Chen Jiu Lin left Singapore on the same day the company announced it had lost US$550m in derivatives trading – almost as much as the company's market value of US$578m.
Chen was arrested at Singapore airport when he returned five days later and released on bail pending a criminal investigation under Singapore's Securities and Commissions Act. Two other CAO executives had their passports seized.
CAO was the biggest Chinese company listed on the Singapore exchange and was at one time held up as an example for others to emulate. Immediately after it announced the losses, the company sought court protection from its creditors.
At writing, CAO had been given six weeks by the Singapore High Court to come up with a restructuring and recovery plan, despite the opposition of several of the 12 banks to whom CAO owes a total of around US$152m.
In documents filed in court, Chen said CAO's parent company, state-linked China Aviation Oil Holding Co, had known about the mounting losses when it sold a 15% stake in its Singapore-listed supplier for US$108m on October 20.
Singapore's independent Securities Investors Association said the sale bore the hallmarks of insider trading.
Chinese regulators maintained that CAO's oil trades were illegal and conducted without government approval, state media reported.
As a result of the collapse, officials said they would look to clamp down on the supervision of domestic companies' trading futures on overseas markets.
Chen himself promised to do all he could to revive the company, "even though it means I will be jumping into a pot of hot soup."