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The German football club Chemnitzer FC is at the centre of a row after fans mourned a far-right activist and known hooligan in the stadium before a match.

The fourth-league club says it is now pressing charges because banned flags were displayed. A big banner honoured the deceased activist, Tommy Haller, reading: "Rest in peace, Tommy".

A player was fined for joining in the tribute, by holding up a black T-shirt.

Chemnitz, an eastern city, saw big far-right demonstrations last August.

Chemnitzer FC chief executive Thomas Uhlig has resigned, accepting responsibility for the controversial tribute that gripped the stadium before Saturday's match against Altglienicke, which ended in a 4-4 draw.

A minute's silence was held in honour of Haller, who was also shown on the stadium's video screen.

In a statement on Monday the club said it was working with prosecutors to establish why the far-right tribute was allowed to happen.

Nazi-style glorification

Club officials, the statement said, "object to all forms of far-right activism and are not ready to bow to those ideologies, nor to surrender football in Chemnitz".

Unnamed officials are quoted as saying there had been far-right threats of "massive clashes" if the club refused to allow the tribute.

The fans - some burning flares - displayed a big white cross on a black background, as well as the banner glorifying Tommy Haller in traditional gothic script, in a style recalling Nazi-era theatrics.

German media report that Haller co-founded a group called HooNaRa - short for "Hooligans, Nazis, Racists" - in the 1990s, which was disbanded in 2007, but remained active informally.

German MDR news, which covers the Chemnitz region, says Haller ran a security firm that employed stewards in the stadium.

He also built up the far-right youth scene in the city and took part in the violent far-right protests there last August, MDR reports.

The anti-immigrant activists were enraged by the fatal stabbing of a Chemnitz man. Two men - an Iraqi and a Syrian - were arrested over that incident.

Footballer in trouble

After scoring a goal on Saturday, Chemnitzer FC striker Daniel Frahn held up a black T-shirt bearing the slogan, in English: "Support your local hools" - German slang for "hooligans".

On Sunday he apologised, saying he had acted "in solidarity with the relatives" of Haller, knowing that those T-shirts had been sold to help pay for his medical care.

"I didn't know that that T-shirt was so widespread in the Nazi scene," he said. The size of Frahn's fine has not been disclosed.

In a further blow to the club, its main sponsor, the Sparkasse Chemnitz bank, says it will end its sponsorship deal at the end of this season. The deal is reported to be worth €170,000 (£147,000; $191,000) annually.