SEOUL, South Korea -- Two South Korean bank presidents resigned Wednesday in a multimillion dollar underground loan scam involving a former Korean CIA official and a 'curb money queen' with remote family ties to the president.
The scandal involving Chang Yong-ja and her husband Lee Chol-hid also sent two of the country's leading firms into bankruptcy and put others in financial difficulty, while the nation's money markets reeled in confusion.
The couple was arrested April 28 on suspicion of smuggling $400,000 out of South Korea into the United States and later was also charged with fraud for lying about its political connections and making loans not backed by security.
Lee, 59, board chairman of the tourism firm Daehwan Industrial Inc., is a former deputy director of the Korean Central Intelligence Agency and a former legislator.
He is accused of using his influence to help his wife's business as one of the nation's leading lenders in the non-bank lending market, where Mrs. Chang, 38, became known as the 'curb money queen' of South Korea.
'Curb lending,' referring figuratively to transactions made on the street outside of banks, is common in much of the Far East, but the scandal involving Mrs. Chang was unusual in the amount of money and the leading banks and business it entangled in its loans.
Following the arrest of the couple, stock prices slumped and curb money lenders discontinued their operations, causing serious cash flow problems for many business firms.
No government officials have been found to be involved in the case so far, a government prosecution announcement said.
President Lim Jae-soo of the Cho-Heung Bank and President Kong Duk-chong of the Commercial Bank of Korea resigned because of their banks' connections with the couple, the announcement said.
Mrs. Chang misled borrowers by boasting of highly placed relatives in South Korean business and politics, the government charged. Her older sister was married to Lee Kyu-kwang, president of the government-owned Korea Mining Promotion Corp., who is a relative of President Chun Doo Hwan's wife.
The prosecution said Lee was not involved in the scandal, and Chun personally ordered a thorough investigation and severe punishment for anyone linked to the loan scheme.