SINGAPORE: Traders and shipping companies scrambled to source fuel and take over supply contracts after Danish marine fuel supplier OW Bunker said a suspected fraud at its Singapore subsidiary had pushed it to the brink of bankruptcy.

The alleged fraud at Singapore-based Dynamic Oil Trading is potentially one of the biggest financial market scandals to hit the city state since 2004, when China Aviation Oil (Singapore) ran up oil futures losses of $550 million.

Denmark’s Berlingske newspaper cited OW Bunker chairman Niels Henrik Jensen as saying Dynamic’s head, Lars Moller, and some of his colleagues arrived unexpectedly at OW Bunker headquarters in Norresundby, Denmark, this week and explained the situation to chief executive Jim Pedersen.

“What we know is based on his own testimony,” Berlingske quoted Jensen as saying. Danish state television, citing unnamed sources, said Dynamic’s management denied any involvement in fraud.

Moller, who a person that knows him said was a popular member of the Danish expat community who turned out regularly for its Singapore Vikings soccer team, could not be reached for comment at Dynamic’s office in Singapore on Friday. No-one was present at his home in a luxury condominium near the city-state’s Botanic Gardens.

OW Bunker said earlier that investors needed to assume that the company’s equity has been wiped out due to losses at Dynamic estimated to be around $125 million.

The company did not give any details of the alleged fraud, but several traders said the problem was likely related to the recent sharp fall in oil prices.

Benchmark Brent crude oil futures have dropped almost 30 percent in value since June to levels last seen in 2010 as rising supplies clash with cooling demand.

“I assume they were very long on their hedges so suffered losses when oil prices came down,” said one trader who has had counterparty positions with OW Bunker.

Taking a long position requires an investment into a product, such as oil, benefiting from rising prices, meaning that a trader with a long position makes a loss if prices fall.

The company, whose shares have been suspended, said it had fired its head of risk management.

Singapore Police Force’s white collar crimes unit declined to comment on whether they were investigating Dynamic.

Bunker trading companies in Singapore are subject to a relatively light touch regulatory regime and would not require a licence to operate from International Enterprise Singapore or the Monetary Authority of Singapore, the two primary regulators for commodity trading.

Dynamic Oil Trading was only launched in 2012. As well as engaging in bunker fuel trading and supply and risk management, the firm runs a premium service to the yachting sector promising to provide customers with yacht fuel anywhere in the world, “no matter how remote,” according to its website.

Its parent OW Bunker is Denmark’s third largest company by revenue and, according to Singapore’s Maritime and Port Authority, went from 30th biggest bunker supplier in 2012 to 13th place a year later, judged by volume.