TOKYO - Panic trading spurred by a widening criminal investigation of a popular Internet startup forced the Tokyo Stock Exchange to shut down 20 minutes early today as share prices plunged for a second day.

It was the first time trading had to end early because the market's computers couldn't handle a surge of transactions.

The benchmark for the Tokyo exchange slid 2.9 percent today. The Nikkei 225 index dropped 464.77 points, its biggest one-day drop since May 10, 2004.

That compounded losses Tuesday when the Nikkei fell 2.8 percent amid reports of a widening investigation into allegations that Livedoor Co. had covered up massive losses. The index has fallen nearly 6 percent the last two days.

“Individual and foreign investors are selling in a panic,” said Satoru Otsuka, senior economist at Mizuho Research Institute in Tokyo. “The problem is that we have no idea how the Livedoor problem will unfold.”

Investors and the Japanese public alike were stunned when prosecutors marched into the Tokyo headquarters of Livedoor on Monday evening on suspicion of violation of securities laws by giving false information.

Livedoor, founded in 1997, offers various Internet services, including consulting, telecommunications, mobile sites and software development. It also has bought up chunks of other companies and managed to raise money by offering more of its own stock.

It is headed by 33-year-old Takafumi Horie, who has risen to celebrity status as a geeky entrepreneur - a rarity in Japan. He has made unsuccessful attempts to buy a media conglomerate and a baseball team and frequently appears on TV.

The national daily Yomiuri Shimbun reported that Livedoor is suspected of concealing an $8.7 million deficit for the full-year results ending September 2004.

Horie denies wrongdoing, and authorities would not comment on the Yomiuri report.

The Japanese media have dubbed the whole affair “Livedoor shock,” which has garnered banner headlines and intense news coverage since the raid.

Internet-related stocks like Softbank Corp. and Yahoo! Japan got hit in the market's plunge, but blue-chip electronics firms like Canon Inc., Toshiba Corp. and Sony Corp. also fell.

Those losses also could be attributed partly to investor disappointment over earnings results Tuesday from U.S. chipmaker Intel Corp. and Web giant Yahoo Inc., which were lower than analysts' expectations.