South Korea's financial authorities have launched an investigation into an allegation that high-ranking officials from Samsung Group engaged in insider trading in a mega-sized merger between its key units, an industry source said Friday.

Samsung Group's fashion unit Cheil Industries Inc. merged with its construction and trading affiliate Samsung C&T Corp. in an 8.9 trillion-won ($7.7 million) deal in July.

Shares of Cheil Industries had been on a steady rise to close at 188,000 won on May 26, when the merger plan was first announced, as they had hovered in the 130,000-170,000 range in April and May.

The Korea Exchange, the country's sole bourse operator, found that nine management-ranking officials from three or four Samsung Group affiliates had bought large amounts of Cheil Industries shares in April and May, according to the source.

The KRX reported the case to the Financial Services Commission and its investigative body recently launched an investigation into the allegation that the officials earned illegal profits using insider information.

However, Samsung Group denied the allegation.

"We've probed the allegation. It's true that they bought Cheil Industries shares, but we found nothing illegal as their stock purchases were worth only 100 or 200 billion won," said an official from the group, asking anonymity.

"They just engaged in normal stock investment. Some of them even don't know about the exact amount as they had entrusted their money to asset managers."

The authorities estimated the value of their purchases at 50 billion won, suspecting the deals were made before the official merger announcement on May 25.

The Samsung officials targeted Cheil Industries shares as they had already received information that the merger ratio of 0.35 Cheil Industries for 1 Samsung C&T share would be calculated from the former's share price at the time, according to the authorities.

The merger ratio was the biggest issue raised by U.S. hedge fund Elliott Associates, which opposed the takeover, calling it a low-ball deal.

After the controversial merger, the new entity, bearing the name of Samsung C&T Corp., officially set sail on Sept. 1, with its shares listed on the stock market two weeks later. (Yonhap)