LONDON – Ukrainian iron-ore producer Ferrexpo plunged the most in three years as its auditor and two directors resigned amid a money laundering investigation at a charity supported by the company.

Ferrexpo announced on Friday morning that Deloitte had resigned without providing any details about the reason. Three days ago, the company disclosed a disagreement between the auditor and Ferrexpo’s board over the role of majority shareholder and CEO Kostyantin Zhevago at the charity, called Blooming Land.

The shares fell 28%, the most since 2015, to 192.60 pence in London, wiping out more than $500-million in market value.

For Ferrexpo, the investigation into the charity is fueling worries about governance and financial controls at the company. Ukrainian authorities are probing whether the charitable foundation was used to launder money and evade taxes. There are indications that some funds may have been “misappropriated,” Ferrexpo said on Tuesday.

The company announced late on Friday that two directors, Mary Reilly and Bert Nacken, who had both been part of the audit committee, will resign from the board.

“Any further potential problems with corporate governance are able to trigger the stock’s selloff, even if they do not significantly undermine the current sound fundamentals of the company,” said Alexander Martynenko, the head of corporate research at Investment Capital Ukraine in Kiev.

On Tuesday, Ferrexpo said its board had a "unanimous view" that Zhevago didn’t have influence over the charity. That clashed with Deloitte’s assessment. The auditors have been "unable to conclude" whether the CEO has significant control, according to Ferrexpo’s statement.

If Ferrexpo board members start changing their opinion, or if the UK or Swiss regulators start questioning the links between Blooming Land and Zhevago, the company could face further trouble, wrote Dmytro Khoroshun, an analyst at Concorde Capital in Kiev.

“If Zhevago was able to prove he was not related to Blooming Land, he could have done so already at the stage of Deloitte’s inquiry, preventing the auditor from resigning,” he said in a note.

ACCOUNTING IRREGULARITIES
The problems at Blooming Land came to light earlier this year after Ferrexpo’s auditors received bank statements from the foundation containing “irregularities.” Ferrexpo has set up an independent review committee to investigate discrepancies in payments to the charitable foundation, established primarily to coordinate the company’s philanthropic activities.

A spokesperson for Deloitte and a spokesman for Ferrexpo declined to comment. Under UK rules, the auditor is likely to make its resignation letter public in the next two weeks.

Through donations to Blooming Land, Ferrexpo says it supports charitable activities in Ukraine. A unit of the iron-ore miner gave the foundation about $110-million over the past six years to fund causes such as diabetes awareness and care of the elderly.

The resignation of Deloitte also comes as the so-called big four accounting firms face increased scrutiny. Last week, the UK’s Competition and Markets Authority renewed its demand for the firms to split their operations into separate business units.

Stung into action by a series of high-profile corporate failures, the regulator said in its final report that a fragile auditing market could only be fixed with government action. The accounting industry has been under fire in the wake of corporate collapses such as those of building contractor Carillion and bakery chain Patisserie Valerie Holdings.