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Tong Yang Group chief to stand trial for fraud

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(Globalpost/GlobalPost)

SEOUL, Jan. 28 (Yonhap) -- The head of financially troubled Tong Yang Group has been indicted on charges of fraudulently issuing and selling financial products, inflicting losses on nearly 40,000 individual investors, state prosecutors said Tuesday.

Chairman Hyun Jae-hyun allegedly orchestrated the issuance of fraudulent corporate bonds and commercial paper (CP) worth some 1.33 trillion won (US$1.22 billion) under the names of the group's affiliates between February and September of last year, even though he knew it was likely the affiliates would be unable to repay maturing debts, they said.

Prosecutors further alleged that Hyun ordered the family-owned conglomerate's money lending unit to illegally extend loans worth 623.1 billion won to the group's other key units suffering from cash shortages.

"While chairman Hyun was fully aware that bankruptcy was inevitable, he made a choice to issue CP and corporate bonds in a fraudulent way instead of choosing to minimize the losses through corporate restructure," said an investigator of Seoul Central District Prosecutors Office.

The 64-year-old chairman is facing multiple charges of fraud, breach of duty and embezzlement, prosecutors said.

The prosecution office said it has also indicted three other former senior executives of the affiliates, including the ex-president of Tongyang Securities, with physical detention on suspicion of colluding with Hyun in the financial fraud.

Seven other incumbent executives of the group have also been charged without physical detention for their alleged participation in the massive fraud, prosecutors said.

In a separate case, Hyun and two other executives are facing additional corruption charges for embezzling company money to amass secret funds, the prosecution office said.

The indictment came a few months after the 38th-largest conglomerate in South Korea filed five of its units for court receivership in late September last year after failing to repay debts worth 110 billion won on a cash shortage.

Hyun has since then been under an intensive probe by both the prosecution office and the financial regular on allegations that he instructed the group's brokerage arm Tongyang Securities Inc. to sell financial products tied to Tong Yang's distressed assets without informing investors of the risks.

The prosecution office said it will continue its investigation on suspicions that the group manipulated stock prices by using undisclosed inside information.

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