HONG KONG (REUTERS) - The chairman of Hong Kong's Mercantile Exchange is under police investigation, the government said on Friday, as three other men were charged with possessing false documents including a fake cheque for US$460 million (S$573 million) following a probe into alleged irregularities at the shuttered exchange.

Barry Cheung, the exchange's controlling shareholder and a close ally of Hong Kong leader Leung Chun-ying, resigned from all of his public posts on Friday on the grounds that he is under police investigation, a government statement said.

Police said they met with Mr Cheung on Friday but he was not arrested.

Local media quoted a statement by Mr Cheung as saying he had never done anything illegal and was assisting the criminal investigation by police.

Mr Cheung said in a statement on Wednesday that he would cooperate fully with the police investigation.

The abrupt closure of the exchange has raised questions over regulatory oversight in Hong Kong and drawn attention to Mr Leung's ties with Mr Cheung, who acted as his campaign chairman in the Hong Kong leadership election last year.

A statement from Leung's office said that the chief executive on Friday received Mr Cheung's resignation from all public posts - including Hong Kong's core policy making body, the Executive Council - "on the ground that Mr Cheung is under police investigation." "The Chief Executive has accepted his resignation," the statement said.

"Mr Leung reiterated that law enforcement authorities including the Police and the Securities and Futures Commission(SFC) would act impartially and continue the investigations of the Hong Kong Mercantile Exchange and Mr Cheung in accordance with the law," the statement said.

A spokeswoman for the Hong Kong police force would not say whether Mr Cheung was a suspect in its investigation.

The exchange, which traded gold and silver futures, handed back its operating licence to regulators last weekend, saying it had insufficient revenues to support its operating expenses.

The SFC said on Tuesday it suspected irregularities in the exchange's operations and referred the case to the police for a criminal investigation.

Three mainland Chinese men - Dai Linyi, 55, Li Shanrong, 49, and Lian Chunren, 50 - were charged on Friday with "possessing a false instrument with intent" to pass them it off as genuine, according to a charge sheet seen by Reuters.

The court gave no details of precisely how the men might be linked to the Hong Kong Mercantile Exchange.

No pleas were taken and the three were remanded in jail. The case was adjourned until July 19.