South Korean prosecutors filed for arrest warrants for former and incumbent executives of Kosdaq-listed display equipment maker Leed Corp., a company where Lime Asset Management Co. under an investigation for failure to meet its payment dues to fund investors owns a 32.54 percent stake.

The Seoul Southern District Prosecutor’s Office said Thursday that it sought court warrants on Tuesday to arrest chief executive of Leed surnamed Koo and three other former and current executives of the company on charges of embezzlement and fraudulent transactions.

The prosecution has been looking into whether there had been some unfair trade practices or false disclosures in the process of multiple ownership changes of Leed over the past four years. The company was sold to a management consultancy in July 2016 but the consulting company resold Leed to a lubricant manufacturer just a week later. The prosecution has been investigating how the lubricant manufacturer raised 11 billion won ($9.25 million) to take over Leed, according to sources.

The prosecution reportedly charged vice president of the lubricant company and Leed’s director surnamed Park for embezzlement. It will also look into possible illegal practices by Leed when it backed billions of won for its subsidiary to enter a new business in 2017, according to sources.

This news is expected to further weigh on Lime Asset Management which has been already under the country’s financial authority’s scrutiny over its fund management schemes. The country’s leading hedge fund has been increasing its stake holding in Leed since 2017 by purchasing convertible bonds. It holds 3,551,532 shares and convertible bonds that can be swapped with 6,824,512 new shares in Leed, which accounts for 32.54 percent of the entire stake of Leed.

Lime Asset has been under a probe by the Financial Supervisory Service after it deferred repayment on 620 billion won worth funds this week due to liquidity problems. The financial authority demanded the company to submit specific plans to meet its payment obligations.

By Lee Hee-su and Choi Mira

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