Mr Chen returned with his wife to China last Tuesday as the worst financial scandal in Singapore since Nick Leeson broke Barings Bank a decade ago came to light. Police and stock exchange officials in Singapore are investigating the losses at CAO, a listed company with a near monopoly on jet-fuel imports into China that last week said that it was seeking court protection from creditors.

The mother company suspended Mr Chen and Singapore officials requested his return to help with their investigation.

CAO said that Mr Chen had returned to China to attend to family matters. 'On December 1, the company requested him to return to Singapore to assist in the investigations. Mr Chen has informed the company that he will return to Singapore sometime this week.'

CAD officials are keen to question Mr Chen further over the October 20 sale by CAO's Beijing parent of a 15 per cent stake in the Singapore-listed company. In an affidavit filed last week, Mr Chen said CAO had told its Beijing parent about its substantial derivatives losses about two weeks before the October 20 share placement.

Lawyers and fund managers yesterday said investors who bought into the October placement could have a legal case against both CAO and Deutsche Bank, which managed the share sale.

'I would think that shareholders who bought into the placement would have grounds to sue,' said the head of a large Singapore-based funds management group.

Deutsche Bank has insisted that the October sale process was conducted in accordance with normal market practice.

CAO is now attempting to stitch together a deal with creditors that will stop them from forcing it into insolvency.

Such a deal could still be possible, given the reluctance of some of the creditors to get offside with the Chinese government, which ultimately controls CAO's Beijing-based parent.

A senior Chinese official yesterday said the country's airline regulator might be prepared to help bail out CAO but said no regulators had been sent to investigate the books of the oil trader and no decision had been taken on a possible cash injection.

'We're very concerned about this,' said General Administration for Civil Aviation of China (CAAC) director Yang Yuanyuan. 'Whether we invest funds to help save CAO will depend on the progress.'

Mr Yang was speaking on the sidelines of a meeting with German Chancellor Gerhard Schroeder at the headquarters of Ameco, an airline repair joint venture owned by Lufthansa and Air China in Beijing.

One senior airline executive in Beijing was sceptical over whether CAAC would provide cash to help out CAO.

'I don't think CAAC will rescue this trading company due to the separation of commercial operations and regulations,' the executive said. '[In addition], they're a ministry, they have no money.'

Likely candidates for a possible capital injection would instead include the State-owned Assets Supervision and Administration Commission, which is in charge of state companies, or the Ministry of Finance, which has provided capital injections to Chinese banks in the past, the executive said.

Under the terms of a statutory demand filed by one of CAO's smaller creditors - Standard Bank London - the Singapore-listed firm could be forced into insolvency if it does not repay US$14.4 million by Thursday.

Additional reporting by Andrew K. Collier in Beijing