The Seoul Central District Court absolved former finance ministry official Byeon Yang-ho and former Korea Exchange Bank chief Lee Kang-won of breach of trust charges over allegations they conspired to understate the lender's value, according to Ma Yong-joo, a court spokesman.

Dallas, Texas-based Lone Star took over KEB in late 2003 by purchasing a controlling stake. The fund has long battled allegations that it was able to acquire the then distressed lender at a bargain price.

In clearing the men, Presiding Judge Lee Kyoo-jin said that there were few other options available to KEB at the time than the purchase by Lone Star, according to Ma.

Prosecutors had contended that Byeon and Lee worked with Lone Star to intentionally understate KEB's assets, thus arranging for the bank to be sold at a price that was up to 825.2 billion won cheaper than it should have been valued.

South Korea's Yonhap news agency quoted a prosecution spokesman as saying prosecutors would appeal the ruling.