Prosecutors sought an arrest warrant for Rhee Jang-han, chairman of Chong Kun Dang Pharmaceutical Corp., on charges that he raked in exorbitant profits by rigging stock prices in the process of selling one of the firm’s affiliates in 2007, officials said Tuesday.

Investigators at the prosecutors’ office in Suwon, Gyeonggi Province have found a “circumstantial clue” indicating that he gained billions of won in excessive profits after boosting stock price of the venture firm Korea Hinet and selling it.

Rhee took over the venture firm in 1997 for 1 billion won ($933,445) and sold 5.1 million of the total 5.8 million shares held by his pharmaceutical company for 8.6 billion won in 2007.

As the stock price jumped more than two-fold, financial authorities demanded that Chong Kun Dang explain how the share price of its affiliate soared just before the sale of the unit.

Investigators are trying to find and verify any suspicious stock transactions made by Rhee and his family members, prosecutorial sources said.

Chong Kun Dang officials denied the charges of stock price manipulation.

“The stock price did not go up unreasonably at the time, and there was no reason (for him) to boost the price. All the processes concerning the sale (of the affiliate) was carried out in a legitimate way,” one of the officials said, declining to be identified.

Since Korea Hinet was listed on the tech-heavy local Kosdaq market in 2000, it has undergone management crises several times. Financial authorities have taken steps to delist the faltering firm.

By Song Sang-ho (sshluck@heraldcorp.com)