According to German prosecutors, former VW CEO Martin Winterkorn may have known the automaker was cheating on emissions tests earlier than he admitted.
He quit in September 2015 after VW admitted to using software to lower the emissions from its diesel vehicles during tests.
Martin Winterkorn has since denied knowing of the violations until late in August 2015, shortly before the board reported them.
However, German authorities said they were now investigating Martin Winterkorn for fraud.
Braunschweig prosecutors said they had searched 28 homes and offices this week in connection with the scandal.
As a result, the number of people accused of misconduct had risen from 21 to 37, including Martin Winterkorn.
German prosecutors said in a statement: “Sufficient indications have resulted from the investigation, particularly the questioning of witnesses and suspects as well as the analysis of seized data, that the accused [Martin Winterkorn] may have known about the manipulating software and its effects sooner than he has said publicly.”
Earlier this month, VW admitted to US prosecutors that about 40 employees had deleted thousands of documents in an effort to hide systematic emissions cheating from regulators.
VW was also fined $4.3 billion by US authorities and agreed to plead guilty to criminal charges.
In addition, VW has agreed to a $15 billion civil settlement with environmental authorities and car owners in the US.
The company is also facing 8.8 billion euros ($9.41 billion) in damage claims following the collapse of VW’s share price after the scandal broke.
VW shares slumped by a third in the immediate aftermath of the scandal and are still 7% below their September 2015 level.
German automaker Volkswagen has agreed a draft $4.3 billion settlement with the Department of Justice and US Customs over the emissions-rigging scandal.
VW also said it would plead guilty to breaking certain US laws.
The company said it was in advanced discussions with the DoJ and US Customs about the deal.
The final agreement has yet to be approved by VW’s management and supervisory board, which could happen later on January 11.
The company said it had negotiated a “concrete draft” of a settlement with US authorities that included criminal and civil fines totaling $4.3 billion, as well as appointing an independent monitor for the next three years.
The fine means that the total costs associated with the emissions cheating scandal are set to exceed the $19.2 billion VW has set aside to deal with the issue.
Volkswagen has already agreed to a $15 billion civil settlement with environmental authorities and car owners in the US.
The scandal erupted in September 2015 when the EPA found that many VW cars sold in America had a “defeat device” – or software – in diesel engines that could detect when they were being tested and adjust the performance accordingly to improve results.
VW subsequently admitted cheating emissions tests in the US and many countries throughout the world.
On January 9 it emerged that VW executives knew about emissions cheating two months before the scandal broke, but chose not to tell US regulators, according to court papers.
The executives involved include Oliver Schmidt, who was in charge of VW’s US environmental regulatory compliance office from 2012 until March 2015.
On January 9, Oliver Schmidt was charged with conspiracy to defraud and has been remanded ahead of a court appearance on January 12.