The prosecution is seeking warrants to arrest Tong Yang Group chairman Hyun Jae-hyun and three former executives accused of fraud and neglect. Hyun and the three former Tong Yang Group executives are suspected of orchestrating illegal dealings that caused damages estimated at nearly 2 trillion won ($1.87 billion).
Last month, Hyun was questioned on three occasions, but each time denied the allegations that he was involved in fraudulent dealings.
According to reports, the Seoul Central District Prosecutors’ Office on Tuesday filed for detention warrants on Hyun and the former executives who led Tong Yang Group subsidiaries including Jeong Jin-seok, who headed Tong Yang Securities.
The other two former Tong Yang executives are Kim Chul and Lee Sang-hwa, who had headed Tong Yang Networks and Tong Yang International, respectively.
Hyun is accused of defrauding investors by approving the issuance of corporate papers despite being aware that the company lacked resources to honor the debt between July and September of last year.
During the period, the group issued corporate papers with a combined value of 413.2 billion won including 156.8 billion won backed by Tong Yang Cement shares. Of the corporate papers backed against Tong Yang Cement shares, more than 100 billion won worth was sold in September through Tong Yang Securities, adding fuel to the suspicions.
Although Hyun denies he had knowledge of the group’s impending problems, his intentions came under scrutiny after five Tong Yang units applied for court receivership in late September and early October.
In addition, the investigators suspect that Hyun either ordered or turned a blind eye to the irregularities in the process of extending 1.56 trillion won in loans to Tong Yang Group subsidiaries through Tong Yang Financial Services in 2012 and 2013.
The group’s finance arm is also suspected to have been used as a tool for compiling fraudulent accounts or in illegally providing funds for other subsidiaries.
While the prosecution’s investigation into the conglomerate picks up pace, the Board of Audit and Inspection is reported to be readying an inspection on the Financial Supervisory Service.
The BAI, which has been looking into the FSS since November, is said to be set to launch a full inspection some time this month once the financial watchdog completes its own probe on Tong Yang Group.
As the Tong Yang Group case unfolded the financial watchdog came under fire for failing to properly monitor financial companies.
An estimated 45,000 people have sustained damages through the group’s actions. More than 19,900 petitions were filed to the FSS regarding the case as of the end of last year, around half of which have been analyzed.
With compensation measures yet to be rolled out, a number of groups of affected investors are taking steps to file class action suits. Others have taken more drastic measures including one person cutting off a finger and attempting to send it to the presidential office to call for the president’s help in the matter.
By Choi He-suk (firstname.lastname@example.org