HYBE chairman Bang Si Hyuk faces potential indictment over alleged capital markets fraud.
Bang Si Hyuk, founder and chairman of HYBE, is expected to be referred to prosecutors on charges of violating Korea’s Capital Markets Act through fraudulent and unfair trading practices.
On July 9th KST, reports from financial authorities and the investment industry confirmed that the Capital Market Investigation Deliberation Committee (CMIDC), an advisory body under the Financial Services Commission’s (FSC) Securities and Futures Commission (SFC), has recently convened and decided to submit the case to the SFC for further action. The final decision on Bang’s case is expected to be addressed at the commission’s regular meeting on July 16th.
The investigation stems from allegations that Bang misled investors by falsely claiming there were no plans for HYBE’s initial public offering (IPO), thereby persuading them to sell their shares to a private equity fund (PEF) affiliated with one of Bang’s associates.
According to industry insiders, in October 2020, prior to HYBE’s IPO (then operating as Big Hit Entertainment), Bang entered into shareholder agreements with multiple PEFs, including Stick Investment, Eastone Equity Partners, and Newmain Equity. The agreement stipulated that if HYBE succeeded in going public within a specific timeframe, Bang would receive 30% of the PEFs’ capital gains. If the IPO failed, he would buy back the shares at the original price.
HYBE did indeed go public during the agreed period, and Bang reportedly profited over KRW 400 billion (approximately USD 290 million) through this arrangement.
The controversy arises from the fact that this shareholder agreement was not disclosed during HYBE’s IPO process. While both HYBE and the IPO underwriters were reportedly aware of the contract, they determined it did not require disclosure based on domestic and international regulations at the time.
However, criticism mounted as early investors claimed to have suffered financial losses due to the lack of transparency. Both the police and financial regulators have since launched investigations.
Earlier, law enforcement twice requested search warrants for HYBE but were denied by prosecutors. The outcome of the July 16th SFC meeting will likely determine whether the case moves forward to formal prosecution.
SEE ALSO: HYBE pledges full cooperation in IPO fraud probe amid controversy over Bang Si Hyuk
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