The head of Tongyang Group, Hyun Jae-hyun, was arrested early Tuesday on suspicions of fraudulent sales of corporate bonds and commercial papers (CP).
Arrest warrants were also issued for three key ex-officials of the cash-strapped conglomerate.
Chairman Hyun allegedly issued one trillion won worth of corporate bonds in 2007 despite the company's tight finances and inability to pay off debts. He allegedly sold the bonds to around 45-thousand investors.
Hyun is also suspected of making group affiliates buy corporate bonds issued the same way and ultimately losing the company 600 billion won.
The Seoul Central District Court said it issued the arrest warrants for Hyun and the three ex-officials on sufficient grounds to suspect them and as they could destroy evidence.
Prosecutors investigating Tongyang Group are expected to quickly wrap up their probe and indict those responsible now that Hyun has been arrested.