China Aviation Oil Singapore

2004 Scandal

CAO began trading oil-related derivatives to hedge its purchases of jet fuel against the volatility of the price of oil. However, CAO had not updated its risk management rules to reflect the more aggressive trading strategy, and its control was loose around its traders. This led to traders even exceeding the current limitations set out by CAO. According to CAO, "As the prices of crude oil were at an all time high at above $55 per barrel, the company faced significant margin calls on its open positions and did not have the resources to satisfy the margin calls". It resulted in US$550 million loss, causing the largest financial scandal to rock Singapore since the collapse of Barings Bank in 1995.

SGX appointed PricewaterhouseCoopers as an auditor to investigate "the circumstances leading to the losses at CAO, the internal controls, risk management and governance practices of CAO, and to report its findings to the Exchange."

CAO then turned to its parent company China Aviation Oil Holding (CAOH) which provided an emergency loan of $100 million, however, it was insufficient which led to a proper restructuring. BP, Temasek Holdings and CAOH agreed to invest 130 million, staving off bankruptcy, preventing the company from being liquidated. Chen Jiulin, CEO of CAO, and four other executives of CAO was arrested as a result of the scandal. Chen pleaded guilty to "insider trading, failure to disclose losses, making false financial statements and conspiring to deceive Deutsche Bank into handling the sale of a stake in the company in 2004".

2020 Allegations of Fraud

Swiss Bank Banque de Commerce et de Placements SA (BCP) sued China Aviation Oil over a $19 million fraudulent deal. BCP gave ZenRock Commodities Trading Pte Ltd a credit letter to purchase 260,000 barrels of oil from CAO. However, Zenrock planned to sell the barrels to PetroChina International (East China) Co. Ltd. instead. BCP had paid CAO $19 million after the company showed documentation indicating that the cargo had been loaded onto an oil tanker in Malacca in Malaysia where Zenrock was responsible for its delivery. BCP claims that CAO has made false representations, thus also claiming that CAO "had acted in breach of the letter of credit". BCP is now claiming damages with interest on top of the original amount it had paid for the cargo.

CAO denies all allegations and claims that the cargo was in fact shipped from Malacca on 27 January 2020 abroad the Vietnam-flagged tanker, Petrolimex 18. It also had received payment from the letter of credit's bank, which is not BCP.