The head of the embattled Tong Yang Group was put behind bars with a court-issued warrant on Monday for further investigation on allegations of fraud and malpractice in issuing and selling financial products.
The 65-year-old chairman Hyun Jae-hyun has been probed by prosecutors for allegedly leading the issuance of fraudulent corporate bonds and commercial paper worth over 2 trillion won ($1.89 billion) since around 2007 and deliberately filing for court receivership of its five affiliates last October, inflicting heavy losses on investors and firms.
The detention came shortly after Judge Jeon Hyu-jae of the Seoul Central District Court accepted prosecutors’ request to issue a pre-trial arrest warrant to further investigate Hyun.
Prosecutors filed the request on Tuesday, last week, on charges of fraud, breach of duty and embezzlement, believing that the chairman planned and directed the issuance of the corporate bonds and CP even though he knew of the high risk of its affiliates failing to repay maturing debts.
Suspicions have also arisen that the family-owned conglomerate’s money lending unit illegally extended loans to the group’s two other key units suffering from cash shortages.
The liquidity crunch put approximately 40,000 individual investors on the brink of losing an estimated nearly 1.6 trillion won in total.
Hyun has so far denied the charges against him.
The decision was made only based on documents submitted by prosecutors and Hyun’s defense lawyer as he refused to attend a court hearing to review the prosecution’s request for an arrest warrant, an unusual move for a suspect.
Three other former senior executives of the affiliates, including the ex-president of Tongyang Securities, were also detained with court-issued warrants for further investigation.
They have been suspected of colluding with Hyun in the financial fraud case, with some facing corruption charges, according to the investigators. (Yonhap News)