One KAI executive was arrested early this month and another is awaiting a court decision on the prosecution's request for his arrest warrant. 

The prosecutors' office said it uncovered some circumstantial evidence that indicates top officials may have worked together in cooking the books for the 18 trillion won KF-X project, ordered by the government in 2015 to develop Korea's own advanced fighter jets and produce more than 120 planes until 2026.

The prosecution secured documents that suggest its former chief Ha Sung-yong was briefed on the situations, the prosecution said. Ha stepped down soon after the investigation began in July. The prosecution is expected to call in Ha soon for questioning.

KAI has been involved in high-profile defense projects including the Surion, T-50 supersonic trainer jet and others. The fraud allegations were first raised in 2015 when the state auditor's inspection found that KAI pocketed some 24 billion won in illicit profits by manipulating development costs in the Surion project.

According to KAI's financial reports, the company saw its revenue soar 53 percent to 3.1 trillion won from 2013 to 2016. Its operating profit also doubled to 314.9 billion won during the same period.

The government established KAI in the wake of the Asian financial crisis in the late 1990s by combining ailing private defense companies. The government injected about 8 trillion won worth of taxpayer money to salvage the firm. (Yonhap)