Mr Chey being arrested in Seoul on Saturday

The prosecutors office said Chairman Chey Tae-won and president Kim Chang-keun were arrested on Saturday, without giving details of how long the would be detained or when they would appear in court.

The two allegedly profited from a deal last year in which a unit of SK bought Mr Chey's stake in a Seoul hotel for more than the market price costing the group 80bn won ($66.7m).

SK officials said the transactions were legal and that the stock was valued by accountants.

"We are very sorry for causing concerns to the people in connection with the prosecution's investigation," the group said in a statement.

Prosecutors say other SK executives also face questioning.

Crack down?

SK owns South Korea's largest refinery and mobile phone carrier.

Mr Chey, the 42-year-old son of the group's founding family, could face more than five years in prison if convicted under new economic crime laws.

The arrests came ahead of the inauguration of Roh Moo-Hyun on Tuesday as South Korean president.

Mr Roh has vowed to crackdown on the family-run conglomerates known as chaebol, whose business practices are widely blamed for South Korea's financial crisis in 1997 and 1998.

SK Group is also being investigated over allegations that it did not disclose a deal to repurchase shares worth 107.8bn won in SK Securities held by US investment bank JP Morgan.