The controversial stock sale was completed two days before Hanjin Shipping, long troubled by an industry slump and ballooning losses, decided to apply for a creditor-led debt revamp and a self-rescue program.

Shares of Hanjin Shipping tumbled 7.3 percent to finish at 2,605 won ($2.28) on the main bourse on Friday. The decision was announced after the market closed.

As Hanjin Shipping submitted the application to creditors on Monday, the shipper suffered another rout with its share price plunging by the daily permissible limit of 29.94 percent to 1,825 won.

Choi's family is estimated to have avoided some 1 billion won in losses by selling their shares ahead of the company's decision to file for debt restructuring.

The nation's financial watchdog has opened an investigation into whether the Choi family sold the shares using undisclosed corporate information to avoid hefty losses.

Market watchers slam the stock sale as a typical case of entrepreneurial moral hazard, regardless of whether it violated a related law or not.

Korea has seen several cases of moral hazard committed by the owner families of embattled companies.

In 2012, Yoon Seok-keum, founder and chairman of mid-size conglomerate Woongjin Group, came under fire for selling 44,000 shares in the group holding company and avoiding 128 million won in losses before the start of the firm's rehabilitation procedures. In December last year, a Seoul high court sentenced him to three years in jail with a five-year stay of execution for fraud and dereliction of duty.

In 2013, some chief executives of affiliates of Tongyang Group were found to have disposed of their stakes in Tongyang Inc.

shortly before the company was placed under court receivership.

Analysts predict Choi may face punishment for her controversial stock sale, which could constitute a violation of the financial investment services and capital market act.

Under the law, executives, staff members and major shareholders of a company are deemed "insiders" who are banned from using undisclosed information. The status is retained for one year even after they retire or the company splits off.

Violators could face a prison sentence of up to 10 years or a fine that amounts to three times the amount of gains or losses avoided.

Currently, Choi is the chairwoman of Eusu Holdings that separated from Hanjin Group in May last year. Eusu Holdings, formerly known as Hanjin Shipping Holdings, has shipping-related units under its wing. Hanjin Shipping is no longer an affiliate of Eusu Holdings.

In April 2014, Korea's leading air carrier Korean Air Lines led by Chairman Cho Yang-ho acquired a 33.23 percent stake in Hanjin Shipping to become the largest shareholder.

Cho's younger brother Soo-ho ran the shipping company until he died in November 2006 and then his wife, Choi, ran the cash-strapped company after the 2008 financial crisis before quitting in April 2014.

Experts said a close legal review is needed to determine whether she should be considered an insider of Hanjin Shipping, but they added she could not avoid an investigation as secondary and tertiary recipients of undisclosed information are subject to punishment for using the information for stock trading under a revision to the act. (Yonhap)