The warnings from Paraguay’s banking scandal

Investigators raided the official residence of Paraguay's president on Thursday as part of a probe into the collapse of Ueno Bank, public prosecutors said, according to Barron's and France 24. The November 3 takeover of Ueno Bank amid major insolvency concerns locked hundreds of thousands of Paraguayans out of their accounts and triggered the impeachment and arrest of president Santiago Pena. The disgraced ex-leader, currently in pre-trial detention, is accused of using his position to illicitly benefit the financial firm. The raid "is part of the investigative proceedings...in connection with the case against the former president," the prosecutor's office said in a statement.

Also Thursday, a Central Bank official, Holger Insfran, was arrested during a raid on his home in the capital, Asuncion. Manuel Astigarraga, right-hand man to top Ueno executive Miguel Vazquez, turned himself in to police. Former Central Bank chief Carlos Carvallo, who previously led Ueno Bank, has already been placed in pretrial detention.

Authorities seized documents, cell phones and computers during a raid Monday on Pena's private home in the capital. The 47-year-old owned shares in Ueno's holding company until he sold them last year. He is accused of using his influence as president to steer millions in government deposits to Ueno and hiding or downplaying its financial woes despite warnings about questionable loans and solvency issues. He denies all charges.

Fury and disbelief over the banking catastrophe have spread across the usually stable South American country. "Everyone is in shock," education trade union secretary Jorge Arevalos told AFP at a demonstration attended by hundreds of doctors and teachers outside Congress. "We don't know how this is going to unfold or what measures will be taken to recover public money. That's why we're going to remain vigilant," he said.

The number of individuals affected by the crisis surpasses the number of the bank's direct clients, which held over $800 million in public funds. The Central Bank said Wednesday it had used a deposit guarantee fund to partially reimburse around 1.8 million people. Most of the money held in Ueno has not been recovered, however. Prosecutors have appealed for international help as they attempt to trace the missing funds. Paraguay's emergency services are among the many sectors impacted by Ueno's implosion.

Ueno began as a small fintech company with a digital-first model that attracted many low-income customers. Within three years, it became a major player handling state pensions and the accounts of several government entities.