By Joyce Lee

SEOUL (Reuters) - The daughter of the founder of South Korea's Lotte Group conglomerate was arrested on Thursday on charges including breach of trust and embezzlement, a judge told Reuters.

Prosecutors applied for a detention warrant earlier this week for Shin Young-ja, who is also a director of Lotte Group's hotel unit, a Seoul Central District Court judge said.

Shin is the first founding family member or high-ranking manager from South Korea's fifth-largest conglomerate to be detained after prosecutors began investigating the group earlier this year.

Prosecutors targeted Lotte with their largest corporate raids ever in terms of manpower in June, looking into a possible slush fund as well as breach of trust involving transactions among the group's companies, sources said.

An initial investigation into Shin's affairs led authorities to publicly open the wider probe, two prosecution sources with direct knowledge of the matter previously told Reuters.

Shin allegedly received bribes of about 3 billion won ($2.6 million) as requests for preferential treatment for brands in Lotte Duty Free stores, one of the prosecution sources told Reuters earlier this week.

Prosecutors also allege Shin embezzled about 4 billion won from an unnamed company that she de facto controls, paid out as salaries for her daughters, the person with direct knowledge said. The people declined to be identified as they were not authorized to speak to media.

Hotel Lotte directed questions to Lotte Duty Free. Lotte Duty Free declined comment.

The fallout from the broader probe into the Lotte business empire has already seen the derailment of a planned initial public offering worth up $4.5 billion for the group's hotel and duty free unit, as well as Lotte Chemical bowing out of bidding for a U.S. company.

Lotte Group Chairman Shin Dong-bin has said Hotel Lotte's IPO plans would be revived with an aim to list around the end of this year.

(Reporting by Joyce Lee; Editing by Stephen Coates)