An arrest warrant was granted on Wednesday for Choi Shin-won, the chairman of SK Networks Co., a general trading company, on suspicion of setting up a slush fund.

Choi is facing charges of embezzlement and breach of trust related to the alleged illicit fund, which has been under investigation by the anti-corruption unit of the Seoul Central District Prosecutors Office.

"There are convincing reasons to suspect the suspect committed the crimes, and there are also concerns that he can destroy evidence using his position," a judge at the Seoul Central District Court said.

He is a son of late SK Group founder Chey Jong-gun and a cousin of Chey Tae-won, chairman of SK Group, a telecom-to-chemicals conglomerate.

Choi served as chairman for SKC Co., a chemical manufacturing company, from 2000 to 2015 and has been in his current position since 2016.

In response to the court's decision, SK Networks said it will make its utmost efforts to avoid a management vacuum amid growing uncertainties surrounding its business environment.

The investigation into the suspected slush fund case began when the Korea Financial Intelligence Unit (KoFIU) under the Financial Services Commission (FSC) spotted suspicious flows of money worth 20 billion won ($18.3 million) at SK Networks in 2018.

Choi faces allegations that he created a slush fund of what the prosecutors believe to be much higher than 20 billion won.

The prosecution stepped up its investigation into the case by raiding the headquarters and branches of SK Networks, SKC and SK Telesys Co., a communication equipment manufacturer, as well as Choi's residence and a local tax office, in October to secure evidence to corroborate the allegations against Choi.

Last month, he was questioned by investigators for more than 12 hours.

In addition, prosecutors are looking into the allegation that he was involved in stock manipulation.

SK Networks bought back 100 billion won worth of treasury shares from March to early June last year. After the plan was made public, shares in the company jumped to 5,600 won from 4,300 won.

Prosecutors suspect the buyback was aimed at boosting stock prices and Choi and company executives may have illegally profited in the process. (Yonhap)