Four employees of Deutsche Bank AG and Deutsche Securities Korea have been indicted on charges of gaining unlawful profits by manipulating stock prices, the Seoul Central District Prosecutors’ Office said Sunday.

Of the four, three work at Deutsche Bank’s Hong Kong branch including one executive.The other is an executive of Deutsche Securities Korea.

The Hong Kong-based individuals have so far refused to comply with the prosecution’s summons. The prosecutors said that if they do not attend the hearing, it plans to request their extradition and to request Interpol’s cooperation if necessary.

The indicted are accused of manipulating stock prices on Nov. 11, 2010 to drive down prices in order to reap profits from put options on KOSPI 200 index, which comprises of select 200 companies from Korea’s benchmark index.

Put options allow the holder to sell shares at a specified price until the expiry date, allowing the holder to gain larger profits the more prices drop.

According to the prosecution, the accused purchased 1.6 billion won ($1.47 million) worth of put options on KOSPI 200, and by selling a large volume of shares to drive prices down they gained 44.8 billion won profits by exercising the put option.

The four Deutsche Bank and Deutsche Securities Korea employees sold 2.4 trillion won worth of shares on seven occasions between 2:50 p.m. and 3 p.m. at prices up to 10 lower than the going rate to drive the index down.

In addition, the accused are said to have made reports regarding sales 1 minute after the deadline of 2:45 p.m., misleading other investors into believing that the bank will not be selling on a large scale.

Due in part to their manipulation, the KOSPI 200 dropped 2.99 percent from the previous day to close at 247.51 on Nov. 11. With the KOSPI in general also dropping 2.7 percent on that day, the prosecution estimates that local investors lost about 140 billion won as a result of the actions taken by the indicted individuals.

By Choi He-suk (cheesuk@heraldcorp.com)