Hugh Eaves, 56, a chartered accountant, has written an apologetic letter to his former City friends, explaining that the "nestegg" they had entrusted to him has been lost on a series of wild financial gambles.
He has reportedly said that his guilt over the losses had made him so desperate that he tried to take his own life.
The fall-out from Mr Eaves's activities could reach further than the Square Mile. As the largest shareholder of Bury Football Club, where he has invested at least pounds 4m, his financial problems could compound the club's woes. Yesterday, it was relegated to the Second Division.
The latest scandal to hit the City springs from Mr Eaves's administration of a fund of about pounds 20m held in bonds in a Swiss bank account on behalf of 15 former colleagues from the investment house Phillips & Drew.
Mr Eaves was entrusted with the money in 1985 after senior partners of the firm had received handsome windfalls when the company was taken over by the Union Bank of Switzerland (UBS).
Mr Eaves was Phillips & Drew's finance director until he left in 1988. He continued to administer the fund, but seems to have engaged in unauthorised speculation.
In his letter of apology, he explained that the money was lost trading on the high-risk financial derivatives markets, where the rogue trader Nick Leeson and Barings Bank came to grief.
Yesterday, Mr Eaves was unavailable for comment. At his home in West Hampstead, north London, his wife, Emma, initially said that he was at church - then later at lunch. When he had still not returned by last night she said he would not be coming back until the waiting media had decamped. "He just feels that he doesn't want to have a chat with anyone at the moment, which is fair enough," she said.
It is understood that attached to his letter of apology, Mr Eaves - who has a son and daughter, both in their 20s - listed his remaining assets, including his shareholdings in Bury FC.
He could be forced to sell these to repay his colleagues if he does not do so voluntarily.
Mr Eaves, who was born in Tottington, near Bury, became a director of Bury FC, one of Britain's oldest clubs, 14 years ago. He invested large sums and bankrolled the club's rise from the bottom of the Third Division to the First.
He quit the club as director last December, saying it was because he had been verbally abused by supporters after Bury lost several matches. However, he retained his shares in Bury - understood to represent 90 per cent of the club's total holdings.
He said in January: "Over the years, my personal financial support for the club has brought the equivalent of around 4,000 extra supporters on the gate each home match, yet that is still not enough to compete properly at this level."
The club's accounts for 1996-97 show a loss of about pounds 900,000.
Yesterday, the team beat Port Vale 1-0 at their home ground, Gigg Lane, but were still relegated.
The beleaguered club refused to say how Mr Eaves's financial problems would affect it. "Terry Robinson, chairman of Bury FC, has no comment ... except to say that the directors of Bury will continue to run the club, which is a limited company," said a statement.
Despite this season's poor performance, Mr Eaves had been a popular figure in Bury. Many fans saw him as their version of Blackburn's millionaire owner and philanthropist Jack Walker, who helped his club to win the Premiership title four years ago.
Something of an eccentric, the bewigged Mr Eaves has a passion for classic cars. A white VW Karmann Ghia was parked outside his house yesterday.
In addition, he is a railway enthusiast and is a director of the Ffestiniog Railway Company in Wales.
He is also a shareholder and director of Swinton Rugby League Club.
A spokesman for Phillips & Drew, now owned by UBS, confirmed that an internal audit was being undertaken. He declined to say whether the pooled money had been held in one of the firm's accounts. "Hugh Eaves has not worked for the company since 1988. The major thing to make clear is that he was involved with the old Phillips & Drew," added the spokesman.
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