CAO chief arrested over $550m scandal

The suspended chief executive of China Aviation Oil (Singapore) was arrested yesterday for allegedly losing $550m (£285m) after trading oil derivatives in Singapore's worst financial scandal since Barings Bank collapsed in 1995.

The suspended chief executive of China Aviation Oil (Singapore) was arrested yesterday for allegedly losing $550m (£285m) after trading oil derivatives in Singapore's worst financial scandal since Barings Bank collapsed in 1995.

Singapore police said Chen Jiulinwas later released on bail. He returned to Singapore yesterday after leaving for China last week when his company announced it was being forced to seek court protection from creditors.

The parent company, China Aviation Oil Holding, owned by the Chinese government, had a near monopoly on the export of jet fuel to mainland China.

Mr Chenis thought to have repeatedly bet the price of oil would fall from $50 a barrel. When it did not, the parent company covered the mounting losses by selling 15 per cent of its 75 per cent stake in CAO Singapore to investors for $120m, without disclosing the problems.

CAOfaces penalties for not disclosing the losses until 30 November. In an affidavit, Mr Chen said the state-owned parent was aware of the losses 10 days before the sale but did not notify the buyers.

Deutsche Bank, which arranged the sale, has said it conducted proper due diligence before selling the shares at a 14 per cent discount.