The head of local biotechnology firm SillaJen was detained Tuesday for alleged involvement in insider trading, raising market fears over SillaJen’s fate as a Kosdaq-listed company.

The Seoul Southern District Court issued an arrest warrant for SillaJen CEO Moon Eun-sang, citing a flight risk and the possibility that he could destroy evidence.

Last week prosecutors requested a warrant for Moon’s arrest on suspicion of violating the local capital market act and dereliction of duty.

He allegedly sold a large amount of company stock right before the price plummeted on the news that a phase 3 trial for Pexa-Vec, an anti-cancer drug, had been suspended. He allegedly sold the shares based on inside information, before the company announced the suspension of the trial.

SillaJen stock, which once traded at more than 160,000 won ($130) per share, has tanked to 12,100 won, and trading has been halted since May 4 due to the CEO’s alleged misconduct.

Until August last year, when the clinical trial was stopped, Moon had sold 2.92 million shares of the drug manufacturer, the value of which amounted to 250 billion won. The company made its debut on the nation’s secondary Kosdaq in December 2016.

He is suspected of taking over shares of the drug firm via a shell company in March 2014.

Prosecutors had sought an arrest warrant for the CEO of the paper company, surnamed Cho, but the court refused because Cho had already pleaded guilty.

“Cho, who has pleaded guilty to the charges against him, is not directly related to SillaJen and thought to have no rights to issue the bonds,” the judge said.

Other former SillaJen executives, including former auditor Gwak Byeong-hak and former CEO Lee Yong-han, are behind bars over allegations of embezzlement and breach of trust.

Upon the news of Moon and other execs’ imprisonment, the Korea Exchange, the nation’s sole exchange operator, said it would decide whether the drugmaker should remain on the Kosdaq. The decision is due May 29.

Companies whose executives are accused of embezzlement or breach of trust are subject to delisting from the nation’s stock market.

Founded in 2006, the drugmaker was once the second-most-valuable company on the Kosdaq, with its market capitalization surpassing 5 trillion won. Its market value now stands at 866.6 billion won.

By Kim Young-won (wone0102@heraldcorp.com)