SEOUL: Among governments struggling to contain the global financial crisis, South Korea set a rare and controversial example over the weekend by arresting a popular blogger who was accused of undermining the financial markets but worshipped by many Koreans as an online guru.

The man, known throughout South Korea by the pen name of Minerva - after the Roman goddess of wisdom - upset the government with his doomsayer's forecasts for the economy and his satirical attacks on President Lee Myung Bak's policies.

But when some of his predictions on the markets proved right, he gained a huge following among South Koreans fretting over an uncertain economic future.

Park Dae Sung's arrest on Saturday on charges of spreading false online information with a harmful intent - a crime punishable by up to five years in prison - came as the South Korean government was escalating its efforts to fight the fallout of the global financial turmoil. Last week, Lee's administration established an emergency economic task force to be based inside the presidential Blue House's "war room," an underground bunker fitted with security hot lines.

Among Asian economies, South Korea has been one of the most visibly affected by the global financial crisis as demand for exports slumped and banks tightened their lending. After the value of its currency plummeted against a scarce U.S. dollar and stock market values nose-dived beginning in mid-2008 - despite officials' repeated insistence until recently that the economy was in good shape - the government has become increasingly sensitive to negative reports on its economy.

"I wrote articles to help those people alienated from the government - small merchants, individuals and ordinary people who had suffered from the financial crisis," Park told journalists on Saturday before he was jailed. "I plead not guilty."

For months, both the media and the authorities have scrambled to identify Minerva, who has uploaded more than 100 anonymous postings in Daum, the country's second-largest Web portal. He achieved a prophet's status after he predicted the collapse of the U.S. investment bank Lehman Brothers, the crash of the Korean currency and the effects of the toxic U.S. mortgage crisis eventually engulfing South Korea.

Newspapers reported his predictions. The government scrambled to dispute his claims. Governing party lawmakers called for his arrest while financial market analysts admitted to avidly following his coverage. His commentaries typically attracted 100,000 viewers per posting.

When state prosecutors stormed his apartment on Wednesday evening, however, they found a soft-spoken 31-year-old Internet buff in between jobs who holed up at home reading mail-order books on finance and scouring the Web. His formal education ended after a two-year community college course in information technology.

The commentary that got him in trouble was his claim on Dec. 29 that the government issued an "emergency order" to financial firms and major corporations to stop buying U.S. dollars in a dire effort to arrest the fall of the Korean won. The government was forced to issue a denial to calm the market, though officials had previously appealed to large companies to stop hoarding dollars.

Kim Yong Sang, a judge at the Seoul Central District Court, approving Park's arrest, said his blogging "affected foreign exchange markets and the nation's credibility."

Park apologized and withdrew his Dec. 29 posting. Many of Park's predictions proved wrong, and he often did not substantiate his claims. He also lied about his background. He once created a mythic aura by describing himself as an aging farmer capable of spewing out financial jargon. In his last posting on Jan. 5, he said he had a master's degree from overseas and had worked on Wall Street.

If Park's rise and fall demonstrates the power of blogging and its problems in the world's most wired country, it also raised questions about how much freedom of expression should be tolerated in cyberspace.

The government camp hopes that Park's case will lend weight to the Lee government's attempt to regulate the country's vigorous and unruly online communities. But the main opposition Democratic Party has accused the government of gagging the Internet, a popular venue for anti-government criticism. It has lined up high-profile lawyers to defend Park.

"The first thing the government did after opening a war room in the name of saving the economy is to arrest Minerva," said Jin Jung Kwon, a college professor and popular blogger, in a commentary posted in an opposition party's Web site over the weekend. "This is a comedy that will make the world laugh."

The government denies suppressing online freedom of expression. But it has long been concerned about the growing influence of Internet gossip. It believes that huge protests last summer against U.S. beef imports, which paralyzed the government for weeks, were instigated in part by online demagogues.

But analysts and the domestic media said that Park's popularity also reflected widespread distrust in Lee's handling of the economy, despite his campaign promises to become the "economy president."

"The government's mistakes and incapability has made Minerva what he is today," the civic group Lawyers for a Democratic Society said in a statement.

To arrest Park, the prosecutors invoked a rarely used provision in the country's online communications law that calls for up to five years in prison for those who "spread false information in public with an intention to harm public interest."

Lee's government used the provision to arrest two people who spread online rumors that riot police officers had killed a female demonstrator and sexually assaulted another during last summer's anti-U.S. beef protests. Both were convicted.

In another case, prosecutors indicted a 19-year-old for urging teenagers to join the beef protests by falsely claiming that all teenagers across South Korea planned a one-day boycott of classes. He was acquitted.

Meanwhile Park, even after his detention, has maintained his dire forecast on the South Korean economy. As part of their efforts to ensure they got the right man, prosecutors gave him a computer with an Internet connection and asked him to write an economic forecast for 2009.

In 45 minutes, Park churned out a two-page commentary, complete with a diagram, predicting a hard time for South Koreans as exports suffered, domestic consumption declined and factories cut production. Shortly after he wrote the analysis while under detention, Hyundai Motor, the country's largest carmaker, announced that it was cutting its production by 25 percent to 30 percent.