Back in December, a story broke in South Korea that HYBE’s founder and Chairman, Bang Si-hyuk, was facing an investigation by the country’s Financial Supervisory Service (FSS).
The reported investigation by South Korea’s financial regulator involved what the media called “secret” contracts with certain shareholders before and during the company’s IPO in 2020.
The story has resurfaced this week, via a new article from the Korea Economic Daily, aka Hankyung, claiming that the FSS is now planning to refer the case to South Korean prosecutors.
Citing sources, the Korea Economic Daily reports that South Korea’s financial regulator has secured evidence that Bang Si-hyuk misled HYBE investors in 2019 by telling them there were no plans for an IPO.
Those alleged claims reportedly prompted investors to sell their shares to private equity funds [PEFs] connected to Bang Si-hyuk, with whom he had supposedly struck profit-sharing deals, while the company was preparing to go public.
The Korea Economic Daily’s report claims that “while investors suffered heavy losses from the post-IPO sell-off, Bang reportedly received 400 billion won ($289.3 million) from the PEFs based on the confidential arrangement”.
HYBE began trading on the Korea Exchange on October 15, 2020.
The global edition of the Korea Economic Daily reports that the FSS is conducting “a fast-tracked investigation into Bang’s transactions with the PEFs and plans to refer the case to prosecutors for potential criminal prosecution”.
The Korea Economic Daily reports that the FSS is now investigating the case over “unfair trade practices,” having supposedly originally investigated it for “violations of securities report descriptions”.
The news outlet also reports that the Financial Crime Investigation Unit of the Seoul Metropolitan Police Agency is conducting a separate investigation into the case.
A key issue in the case is that those alleged shareholder agreements were reportedly not disclosed in HYBE’s IPO filings, which, if true, could be a violation of the Capital Markets Act in South Korea.
The Korea Times notes that “offenses involving illegal profits or avoiding losses of over 5 billion won are punishable under the Capital Markets Act by a minimum of five years in prison and up to life imprisonment”.
The Korea Economic Daily cites a HYBE spokesperson as saying: “All transactions were conducted within legal boundaries after going through a legal review.”
HYBE denied allegations of any wrongdoing when the initial story broke at the end of 2024.
“Our company provided the shareholder agreement in question to the IPO underwriters during the listing preparation process,” HYBE said at the time.
MBW has reached out to HYBE for comment on the latest reports.Music Business Worldwide
