(Recasts with regulator comment, court hearing)
TEL AVIV, June 21 (Reuters) - Israel's markets regulator said on Wednesday that it suspected the chairman of Bezeq Israel Telecom of fraud after it opened an investigation into the country's largest telecom group.
The Israel Securities Authority (ISA) raided the company's offices on Tuesday as part of an investigation into Chairman Shaul Elovitch and other executives over alleged improprieties surrounding a billion-shekel deal.
Elovitch, who controls the telecoms company through holding company Eurocom Group, was held for questioning and then released on 5 million shekels ($1.4 million) bail by a Tel Aviv court on Wednesday.
He has denied any wrongdoing.
The case focuses on Bezeq's 2015 acquisition of the remaining stake in its satellite TV unit, YES, from parent company Eurocom.
The ISA said it suspects Elovitch acted in a conflict of interest and that Bezeq executives are suspected of interfering with operations connected to that deal over the following year to artificially impact financial reports.
Elovitch and two senior officers at YES - both of whom were remanded to house arrest while denying wrongdoing - are suspected of fraud, financial reporting crimes and obstruction of justice, the ISA said.
Both Bezeq and Eurocom declined to comment.
Bezeq shares fell nearly 5 percent on Tuesday, but held steady on Wednesday at 6.16 shekels.
Eurocom gives Elovitch control over a myriad of assets such as satellite operator Spacecom and Enlight Renewable Energy. He is also a close friend of Prime Minister Benjamin Netanyahu, a relationship that bars Netanyahu from dealing with all things Bezeq.
Bezeq has dominated Israel's telecom sector for decades and, with a generous dividend policy of distributing all its net profit, is a favourite among foreign investors. ($1 = 3.5410 shekels) (Reporting by Tova Cohen and Steven Scheer, Writing by Ari Rabinovitch)