Horie, 33, who shook corporate Japan with his aggressive business tactics, was arrested in January, months after running unsuccessfully for parliament as a ruling-party poster boy for reform.


Media reports said he had denied any illegal actions.


Livedoor and a Livedoor affiliate were indicted on Monday, as were three others: Ryoji Miyauchi, former Livedoor chief financial officer, Fumito Okamoto, former Livedoor director and Osanari Nakamura, former executive, Tokyo prosecutors’ office said.


"We will make clear through the trial that the key to Livedoor's rapid growth was, in fact, criminal acts that damaged the fairness of securities transactions," the prosecutors' statement said.


"We will make clear through the trial that the key to Livedoor's rapid growth was, in fact, criminal acts that damaged the fairness of securities transactions"

Prosecutors' statement

The case exposed the inadequacy of the Tokyo Stock Exchange's trading systems, prompted loud calls for a beefed-up securities watchdog, and embarrassed Junichiro Koizumi, the prime minister, because ruling-party executives backed Horie in a failed attempt for a seat in parliament last September.


The arrest and charges represent a fall from grace for Horie, a Tokyo University dropout who strung together a collection of Internet businesses and became a symbol of an innovative and dynamic "New Japan" that challenged a complacent Japan Inc.


The pudgy, T-shirt clad Horie, who used to drive a Ferrari and lived in Tokyo's expensive Roppongi Hills complex, is locked up in a tiny cell, reading an encyclopedia between interrogation sessions, according to Japanese media.


Horie faces up to five years in prison or a fine of up to 5 million yen ($42,000) if he is found guilty.


Household name


The case exposed the Tokyo stock
exchange's trading system

A raid on Livedoor's offices on 16 January roiled the Tokyo share market as investors pulled the plug on other web companies and a flood of "sell" orders threatened to bring down the exchange's trading systems.


Prices have rebounded since, but Livedoor's shares are down more than 90% from their highs in late December.


Horie founded Livedoor's predecessor, Livin On the Edge, less than a decade ago with just $50,000 in capital.


Through takeovers and self-promotion, Horie - nicknamed "Horiemon" after the popular cat-like Japanese cartoon character Doraemon - turned his start-up into a $6 billion company before the raid last month.


He became a household name after a spurned attempt to buy a baseball team in 2004 and a rare takeover battle with a media group, Fuji Television Network Inc.


Horie was lauded by supporters for attacking old-style business practices of ignoring shareholders in favour of managers and long-standing corporate ties.


Confucian morals


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But he offended many corporate executives, old guard politicians and established media with his "making money is everything" mantra and aggressive ways.


"It's all about imposing Confucian morals and telling the younger generation that they did something wrong," said Jesper Koll, chief economist at Merrill Lynch in Tokyo. "It's a morality lesson for their children. The question is, will this be enough or will there be more?"


But others said Horie's "crimes" are hardly unique in the annals of corporate Japan.


"It seems to me that the kind of market manipulation that he is accused of - and this is perhaps dishonest behaviour - is very traditional practice in the Japanese financial market," said Bill Emmott, the Economist editor and author of several books on Japan, in a recent interview with the Daily Yomiuri newspaper.


"So I don't see how what he is accused of doing is anything new. It's really, I'm afraid, quite typical."