Paraguay’s ex-president taken into custody over alleged bank crisis role

ASUNCION, Paraguay (Reuters) — A Paraguayan judge on Saturday ordered former president Santiago Peña to be held in pretrial detention at a military facility while prosecutors investigate his ties to digital lender ueno, whose collapse has left millions of customers struggling to access their accounts.

Judge Humberto Otazú ordered Peña, who has been charged with breach of trust and administration for personal gain, to be held at the facility, saying detention was necessary to ensure he remained in the country while the case proceeded.

The detention, a day after Peña’s removal from office, deepens a political and financial crisis that has prompted protests in Asuncion, swept up senior officials and led regulators to try to contain risks to the wider financial system.

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Peña’s attorney, Ricardo Preda, told journalists that Peña was pleading not guilty to the charges.

“We will submit to the investigation and I am sure that when this investigation is over the result will be the dismissal,” Preda said.

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Otazú also ordered former central bank chief Carlos Carvallo to pretrial detention in a holding center after prosecutors charged him with breach of trust, producing false public documents and administration for personal gain. Carvallo did not respond to a request for comment.

Pena maintained close relations with Israel, and in 2024, reopened his country’s embassy in Jerusalem, making it the sixth country at the time to make the move. Most other Israeli allies maintain an embassy in Tel Aviv, with many saying that the status of Jerusalem should be determined during a future two-state solution.

Conflict-of-interest allegations

Prosecutors allege that Peña used his position as president to influence decisions by government agencies and state-owned entities to keep large amounts of public money deposited at ueno, despite maintaining financial ties to the lender. They say that relationship created a conflict of interest as Peña encouraged, facilitated, or influenced decisions benefiting the bank.

Peña, who was a shareholder in ueno’s holding company until March 2025, has denied wrongdoing and said the bank’s problems were a regulatory matter.

Peña had arrived at the Attorney General’s Office earlier on Saturday to appear before prosecutors following his dramatic removal from power on Friday. His ouster brought Vice President Pedro Alliana to power, with the longtime ruling Colorado Party politician sworn in on Friday to complete Peña’s term through August 2028.

The two charges against Peña could carry a sentence of up to 10 years in prison each, said prosecutor Nancy Salomón.

Carvallo resigned as central bank chief earlier this week as the crisis surrounding ueno escalated. He had previously headed the digital lender until 2023.

The central bank said on Saturday that the equivalent of $160 million had been paid out to nearly 1.2 million savers under the state deposit guarantee scheme.

Times of Israel staff contributed to this report.

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