HONG KONG (Reuters) - Activist investor Elliott Management Corp has begun new legal proceedings against Bank of East Asia (BEA) <0023.HK> over a share placement, escalating a long-running dispute between the New York-based hedge fund and the tycoon-owned Hong Kong bank.

Elliott, which has a 7 percent stake in BEA, said on Monday it has filed a lawsuit in the Hong Kong court against the bank, the majority of the bank's directors, its CEO and chairman.

In a statement, Elliott cited "allegations of unfairly prejudicial conduct" and "alleged serious corporate governance failings" in relation to last year's issue of new shares to Japan's Sumitomo Mitsui Banking Corp (SMBC).

The dispute pits the $27 billion hedge fund founded by billionaire Paul Singer against BEA's flashy chairman and former politician David Li, whose grandfather founded the bank nearly 100 years ago and whose family is among the city's best connected.

It illustrates the tension between minority shareholders in Asia pushing for better returns and transparency, and local conglomerates used to running their publicly listed businesses with less scrutiny of corporate governance than is typical in the United States and Europe.

BEA is the last big family-run bank in Hong Kong, but its profitability lags its listed peers which Elliott has claimed is due to weak management.

In February, Elliott called for the bank to be put up for sale but contractual restrictions on current strategic shareholdings held by SMBC, a unit of Sumitomo Mitsui Financial Group Inc <8316.T>, and Spain's Caixabank <CABK.MC> would prevent them from selling to a third party, scuttling a potential takeover offer.

Elliott, known for battles against corporate boards, said on Monday that these share placements have "resulted in the entrenchment of management control over BEA at the expense of minority shareholders, whose shareholdings have unjustifiably been diluted to a significant extent over several years".

The hedge fund hopes to secure a declaration from the court that the share placements were passed by BEA for "an improper purpose" and to secure an order requiring BEA to lift the contractual restrictions that would currently prevent SMBC and Caixa from reducing their stakes.

In a statement, BEA said Elliott's allegations were "extraordinary". "BEA and its directors strongly oppose the petition, and are of the view that Elliott's petition and conduct are contrary to the interests of the bank and its shareholders," it said.

The lawsuit follows Elliott's successful bid last year to secure an order requiring BEA and its directors to hand over documents relating to the share sales.

(Reporting by Michelle Price; Additional reporting by Sumeet Chatterjee and Elzio Barreto; Editing by Muralikumar Anantharaman)