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NAIROBI, June 28 (Reuters) - A court on Wednesday charged the ex-chairman of a Kenyan bank with conspiring to defraud depositors of 1.7 billion Kenyan shillings ($16 million), in a case that undermined confidence in the country's banking sector.
Former Chase Bank chairman Mohamed Zafrullah Khan faced nine charges, all of which he denied. They also included stealing by a director and failing to comply with anti-money laundering procedures.
Between August 2009 and March 2016, Khan "falsely pretend(ed) that the disbursements ...were genuine loan facilities," according to the charge read out in the Nairobi economic crimes court.
Chase Bank Kenya Ltd went into receivership in April 2016 after failing to meet its financial obligations.
Khan is the first person from the bank to be formally charged with a financial offence since then.
The court returned Khan to police custody after government fraud investigators argued he was a flight risk and might tamper with evidence. The court will rule on his application for bail on Thursday.
Chase's receivership followed that of another mid-sized lender, Imperial Bank, and of a smaller one, Dubai Bank Kenya. The closures and a jump in bad debts shook investor confidence.
Chase's affairs are being managed by the Kenya Deposit Insurance Corporation (KDIC), a state body that protects depositors.
The central bank wants to find a strategic investor for Chase but has not specified what size stake it will sell. The government says 12 entities have expressed an interest.
$1 = 103.5700 Kenyan shillings editing by Katharine Houreld and John Stonestreet