The chairman of hedge fund Lone Star Funds may be spending more time in South Korea than he planned, after prosecutors slapped a 10-day travel ban on him.

John Grayken traveled to the country yesterday to testify in the stock-price manipulation trial of one of its portfolio companies. Prosecutors have sought to question Grayken for months, and said he would be brought in for questioning after his court appearance, scheduled for today. It would not say how long he would be detained for; South Korean prosecutors can hold a person in custody for up to a month before arresting them.

At issue is Lone Star’s purchase of a majority stake in Korea Exchange Bank in 2003. Some labor unions and politicians alleges that the hedge fund colluded with KEB management to depress its stock price in advance of that deal, in which Lone Star paid US$1.2 billion for a 65% share of the firm.

Lone Star came under a hail of criticism in 2006, when it agreed to sell KEB to Kookmin Bank at a US$4 billion profit. Last year, it broke off that deal, saying KEB’s value has grown further, striking a new tentative agreement in September to sell the bank to HSBC. This time around, the Dallas-based hedge fund stands to turn a US$5 billion, though the South Korean Financial Supervisory Commission has said it will not make a decision on the proposed deal until the legal situation is resolved.

Grayken has defended his firm’s stewardship of KEB, saying Lone Star’s investment and management shakeup resulted in its soaring value.