Paraguay holds ex-president in bank case

Santiago Peña, the former president of Paraguay, was placed in pretrial detention at a military facility on Saturday. The move follows a judge's order to keep him in the country while prosecutors investigate his role in the collapse of the digital lender ueno. The detention occurred one day after Peña was removed from office, adding urgency to a financial crisis that has left millions of customers unable to access their accounts.

Judge Humberto Otazú stated that detention was necessary to ensure Peña remained available for the legal process. He faces charges of breach of trust and administration for personal gain. Prosecutors allege that Peña used his presidential position to influence government agencies and state-owned entities. They say these actions kept large amounts of public money deposited at ueno while he maintained financial ties to the bank.

Peña was a shareholder in ueno’s holding company until March 2025. He has denied wrongdoing, arguing that the bank’s difficulties were a regulatory matter. His attorney, Ricardo Preda, told journalists that Peña is pleading not guilty. Preda added that the defense will submit to the investigation and expects the case to be dismissed once it concludes.

The legal action against Peña follows his dramatic removal from power on Friday. Vice President Pedro Alliana, a member of the long ruling Colorado Party, was sworn in on Friday to complete the term through August 2028. Alliana now leads a government grappling with protests in Asuncion and efforts by regulators to contain risks to the wider financial system.

Prosecutor Nancy Salomón said the two charges against Peña could carry a sentence of up to 10 years in prison each. The central bank reported on Saturday that the state deposit guarantee scheme had paid out the equivalent of $160 million to nearly 1.2 million savers. This payout aims to stabilize the banking sector after the failure of the digital platform.

Former central bank chief Carlos Carvallo was also ordered into pretrial detention in a holding center. He faces charges including breach of trust, producing false public documents, and administration for personal gain. Carvallo resigned earlier this week as the crisis escalated, having previously headed ueno until 2023. He did not respond to a request for comment regarding his new legal status.

Peña’s tenure included a close relationship with Israel. In 2024, he reopened Paraguay’s embassy in Jerusalem, making the country the sixth to do so at the time. Most other allies of Israel maintain embassies in Tel Aviv, often citing the need to determine Jerusalem’s status during a future two-state solution.