A South Korean court on Tuesday refused to issue an arrest warrant against K-pop star Seungri over charges including prostitution in a snowballing sex scandal, Yonhap news agency reported.

The 28-year-old singer from popular boy band BIGBANG and his business partner are accused of arranging sex services for potential investors and rich clients at a nightclub owned by the pair.

Seoul Central District Court said there was "room for dispute" over his alleged embezzlement and that there was little concern that he could destroy evidence, the South Korean news agency said.

Earlier in the day, Seungri -- real name Lee Seung-hyun -- attended a court hearing over the allegations.

He later left the building, his hands cuffed and covered with a cloth, to be taken to a nearby detention centre to await the court's decision.

Police investigators allege that Seungri and his partner procured a dozen prostitutes for a group of Japanese investors in 2015 at their upmarket Burning Sun nightclub, according to Yonhap news agency.

The pair are also accused of embezzling around 530 million won (US$450,000) from the business and face charges of violating sanitary codes at the club, where drug peddling was allegedly commonplace and women are said to have been regularly raped.

Seungri, who announced his retirement from showbusiness in March as the scandal ballooned, has denied the charges.

Other stars have been embroiled in the allegations, which have cast a shadow over the K-pop industry after investigations into Seungri revealed an online chatroom where a handful of male celebrities shared illegally filmed sex videos.

Singer-songwriter Jung Joon-young, who ran the chatroom, was arrested in March after admitting to filming himself having sex and sharing the footage without his partners' consent.

A member of boy band FT Island was arrested earlier this month while another figure has announced his retirement from the entertainment industry amid an ongoing probe.