Japanese prosecutors last night raided the offices of Livedoor, the internet services group, and the home of its president, Takafumi Horie, on suspicion of possible securities law violations.

Shares in Livedoor were automaticaly suspended when trading opened in Tokyo this morning, with news of the raid prompting a glut of sell orders which pushed the shares to their lower daily limit.

More than a dozen prosecutors marched into Livedoor's stylish headquarters in central Tokyo and seized documents and computers as part of an investigation into whether the group and its high-profile president misled the market in one of its many deals.

Prosecutors were also seen filing into the private residence of Mr Horie, in a raid that was flagged well in advance to the Japanese media.

Livedoor said this morning that it had begun an internal investigation following the raid.

Mr Horie told a news conference: "We are making our best effort internally to find out what has happened and we will disclose our findings to the public as soon as we find out."

Last night's raid adds to the controversy surrounding Livedoor and Mr Horie - cheered as representing a new, more vibrant style of business but also castigated as the ugly new face of market capitalism in Japan.

It follows a year in which Livedoor and its president became household names in Japan when the group suddenly emerged with a major stake in Nippon Broadcasting Systems, a radio broadcaster, and expressed interest in acquiring Fuji TV, one of the country's largest TV broadcasters.

That takeover battle spurred a nationwide debate on corporate governance, the pros and cons of market capitalism and led to a copycat bid by rival Rakuten, which tried and failed to gain control of TBS, another leading broadcaster.

It also highlighted a split between the old guard - for whom Mr Horie represented everything that was wrong with western-style market capitalism - and those with more reform-minded views.

The acquisition under investigation by prosecutors involves Livedoor Marketing, an internet advertising company formerly known as ValueClick, in which Livedoor has a 29.3 per cent stake.

Prosecutors allege that last October, Livedoor Marketing announced it would acquire a publisher despite the fact it already controlled the company, in an effort to boost its share price. Such activity would constitute market manipulation, a serious offence, which can lead to a fine and a possible jail term.

Livedoor, which has grown from a small website production company started by Mr Horie into a group with a market value of Y730bn ($6.4bn), has spurred controversy with its M&A activity. Sales have grown from Y3.9bn in 2002 to Y78.4bn.

Japan's Nikkei was down 0.71 per cent this morning. Other internet-related stocks also fell, with Rakuten down 4.5 per cent.