Paraguay: police raid home of removed president Pena as bank collapse probe widens

Police in Paraguay raided the home of removed president Santiago Pena on Sunday as part of the investigation into the collapse of one of the country's largest digital banks, a failure that has tipped the South American nation into its deepest economic and political crisis in recent years.

Pena, an ally of US President Donald Trump who took office in 2023, was removed on Friday after the fall of Ueno Bank froze the savings of nearly three million customers and triggered mass protests. The Senate voted unanimously to remove him, a day after rejecting his attempt to resign, and he was arrested. On Saturday, a judge ordered him held in pretrial detention at a military facility to ensure he remains in the country.

Prosecutors confirmed that officers also searched Pena's mansion outside the capital, Asuncion. He denies wrongdoing, and his lawyer says he is innocent and will cooperate with investigators.

Vice President Pedro Alliana has been sworn in to serve the remainder of the term, which runs to August 2026. He said on Sunday that the government has already repaid about 158 million dollars to 1.2 million Ueno customers whose funds were frozen, with more reimbursements expected this week.

Pena is charged with breach of trust and administration for personal gain, each carrying up to 10 years in prison, and is accused of channelling public funds into Ueno, a digital bank founded in 2021 in whose parent company he held shares until March 2025. By June, the bank held around 850 million dollars of public money, including state pension funds. The indictment says Pena took two loans worth about 500,000 dollars from Ueno in 2024 to build his mansion, with monthly mortgage payments of 38,000 dollars - six times his presidential salary.

The scandal has also ensnared former central bank chief Carlos Carvallo, who previously led Ueno and is in pretrial detention. The central bank intervened after finding the bank had breached minimum solvency requirements and seen its capital fall below half the legal minimum. Pena rejects the charges, saying the bank's troubles were a regulatory matter.