EADS, Europe's troubled aerospace and defence giant, faced a new bout of turbulence today after France's stock market regulator said it had found evidence of insider trading in connection with production delays at Airbus, its aircraft division.

In a statement, the Autorité des Marchés Financiers confirmed a preliminary report which highlighted "massive" insider dealing by EADS' executives and corporate shareholders.

The AMF also said that it had found evidence of breach of market information and of insider trading rules at the aerospace and defence giant in connection with production delays at its Airbus aircraft division.

In a statement, the regulator confirmed a preliminary report which highlighted "massive" insider dealing by EADS' executives and corporate shareholders.

The regulator, which claimed the company had misled the financial markets with the publication of false information, paved the way for a full scale criminal inquiry when it said its findings had been transferred to the Paris prosecutor's office.

The group, which is struggling to shrug off a crisis provoked by its failure to deliver the flagship A380 on time, warned that the investigation would be damaging for both its image and reputation.

However Louis Gallois, chief executive of EADS, defended its track record on providing transparency and said that it would defend its managers: "EADS will support its managers in their defence, it intends to demonstrate that it has applied standards of excellence when communicating to the market and has acted with full transparency."

Commentators said the entire franco-german management structure could unravel if senior executives are forced to resign over the scandal, leaving EADS adrift at critical time.

The move comes with Mr Gallois, striving to implement a sweeping cost-cutting programme as the falling dollar eats into the group's profits.

The insider trading allegations relate to the sale of stock by executives and investors in 2005 and 2006 at a time when the share price was bouyant on the back of optimistic forecasts.

They are accused of offloading stock before the revelation of a six month delay in producing the A380 became public knowledge. When it did, in June 2006, Eads' share price fell 26 per cent, wiping E5.5bn off its stock market value.

In its preliminary report leaked last year, the regulator accused 21 past and present senior executives at Eads of insider trading, including Noel Forgeard, the former chief executive, and Thomas Enders, the head of Airbus. Both have denied the accusations.

It also accused the group's two core shareholders, Lagarde[grave]re, the French media group, and Daimler, the German carmaker, which both announced the sale of stock in April 2006.

According to Les Echos, the French financial daily, insider trading allegations have been maintained against 17 of the 21 executives named in the preliminary report.

Lagardère said it had been cleared of all suspicion by the regulator. Daimler issued a statement denying that it had been guilty of insider trading.

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