"Usually if there was a government crackdown on import financing the internal risk managers weren't that worried because they thought the loans were safe. The possibility of a fraud has risk managers a lot more concerned," said metals analyst Sijin Cheng, of Barclays in Singapore.
Foreign banks are confident lending money at international interest rates to Chinese commodity importers if they have secured the loans. International traders often help, splitting the difference between the cost of the foreign currency loan and the higher interest rates in China.
The investigation has raised alarms over import financing of iron ore, also increasingly conducted out of Singapore.
Read MoreQingdao Port in weak debut, concerns over metal financing probe weighs
Corporate filings for Dezheng Resources' trading subsidiary – which operated in Singapore and Hong Kong under the name Zhong Jun Resources – record obligations to at least nine international banks. It is unclear how many of those obligations have been discharged already.
Mr Chen of Dezheng is now a Singapore citizen. Singapore's Ministry of Foreign Affairs said it was giving consular assistance to Mr Chen's family.
His brother Chen Jilong is also listed as a director of Zhong Jun, but told the FT he did not know anything about the company. He said he last spoke with his brother a month ago, and could no longer reach him on his mobile phone.
Borrowing against imported commodities allows Chinese firms to get cash at lower rates, which they can then use for operations or to lend on at higher interest rates to more desperate borrowers. China has tried multiple times to restrict access to import financing, in an ongoing effort to starve credit to sectors struggling with overcapacity.
More from the Financial Times:
Asia-Pacific tops property investment
Hackers claim attacks on World Cup sites
Lawskyasks BNP to remove adviser
The risks of the shadow banking sector is that no one knows who the ultimate borrower is, how indebted they are or how many people they owe. To date, foreign banks engaged in trade financing have been mostly insulated from that risk, because in the case of a default they could reclaim the collateral.
A liquidity squeeze in China last June was taken as a warning by some banks to reassess exposure to some riskier Chinese clients.
"The market got the message that the overall direction should be deleveraging and reassessing risks. Banks already made this kind of preparation, so I don't think this incident will cause banks to suddenly halt trade finance," said a metals trader at a foreign bank in Shanghai.