Prosecutors have indicted the chief executive officer of an asset management company over his alleged involvement in a massive hedge fund scandal.

The Seoul Southern District Prosecutors Office on Thursday indicted Won Jong-jun, head of Seoul-based fund operator Lime Asset Management Co., on charges of fraud and violation of capital market and financial investment laws.

A senior marketing executive, only identified by his surname Lee, has been also indicted on the same charges.

They were allegedly involved in the firm's cover-up of massive losses and subsequent suspension of fund redemption worth an estimated 1.6 trillion won (US$1.3 billion).

According to the investigators, they are accused of deceiving investors into putting a total of 200 billion won into 18 trade finance funds operated by Lime Asset, though the money was actually intended to be used to redeem the company's existing funds.

Lime Asset investors filed criminal complaints against Won and Lee in March, arguing they had suffered huge losses after investing in the firm's trade finance funds due to the company's deceptive fundraising.

Won has been in pre-trial detention since July 14.

In a related development, Lee Jong-pil, a former vice president of Lime Asset, and Kim Bong-hyun, a financier believed to be the largest financial source for the fund operator, have also been arrested and indicted for their alleged involvement in the scandal.

Founded in 2012 as an investment adviser, Lime Asset was granted a license to operate private funds in 2015. The company was managing a record high of 5.7 trillion won as of June last year.

In October, however, the company froze withdrawals, citing an inability to liquidate enough assets to meet redemption requests, prompting the nation's financial watchdog to conduct a probe and conclude the company duped investors by concealing losses and continuing sales of related products. (Yonhap)