Police in Guangdong have unearthed the province's biggest-ever case of marked industrial oil smuggling, involving a whopping 6 billion yuan (US$879 million), local media reported on Tuesday.

Tan Qiang, 40, and his youngest brother, who was not named, are suspected of masterminding the smuggling outfit, and were arrested earlier this year at their villa in Aotou, a coastal township of Huizhou, the Guangzhou-based Southern Metropolis Daily reported.

Tan and his gang allegedly smuggled more than 200,000 tons of marked industrial oil, commonly known as red oil in South China, valued at about 6 billion yuan, into China from Hong Kong and other countries, it said.

The oil is used in industrial machinery and it is alleged the gang was selling it to companies within China.

"The arrest of Tan and his brother was a joint action by the Ministry of Public Security and the General Administration for Customs," the newspaper quoted an unnamed insider as having said.

More than 150 armed police officers and customs law enforcers were involved in the operation, which bypassed the Guangdong provincial and Huizhou city governments.

According to the report, officers acting on a tip-off stormed into the villa early in the morning while the suspects were still asleep and handcuffed them.

The two suspects are reportedly being held outside the limits of Guangdong province to prevent any interference in the investigation, which is so far the largest red oil smuggling case that has come to light in the southern province, which borders the administrative regions of Hong Kong and Macao.

Tan, the oldest of three brothers, is said to be a well-known figure with a lot of high-level connections in Aotou and the city of Huizhou.

He owns the only large supermarket in the area, located in the five-story Sanxing Shopping Plaza in Aotou.

Tan and his brothers also own nightclubs and other entertainment venues in Aotou and Danshui townships.

"I could hear the sound of money scanners counting banknotes from Tan's villa every day," one of Tan's neighbors said, adding that he also saw a number of high-end luxury cars drive in and out of the property.

Tan's second brother has been in police custody since May last year. He was caught trying to smuggle 108 foreign-brand cars and spare parts, valued at more than 500 million yuan, on to the mainland from Hong Kong by sea.

Aotou residents said many people had tried to persuade Tan to give up smuggling after his brother was detained.

Sources said the massive profit margin in the smuggling of red oil was too tempting for Tan to give up.