Bang Si Hyuk under investigation for alleged IPO fraud, authorities raid HYBE over another executive’s alleged insider trading

Alright, before I try to catch up on the other ongoing legal messes, here’s a new one (I think, for here at least) that involves HYBE being investigated for alleged financial crimes. The Financial Supervisory Service (FSS) is reportedly preparing formal criminal charges against CEO Bang Si Hyuk over suspicions of fraudulent transactions related to HYBE’s IPO back in 2019 and 2020.

Bang Si-hyuk, founder and chairman of HYBE, the K-pop powerhouse behind BTS, is under investigation by the Financial Supervisory Service (FSS) for allegedly defrauding investors and pocketing some 400 billion won ($289 million) during the company’s initial public offering (IPO) process, according to sources in the financial industry Thursday.

According to industry sources, the FSS has gathered evidence suggesting that in 2019, Bang misled early investors by claiming HYBE had no plans to go public. This allegedly caused them to sell their shares to a private equity fund (PEF) founded by one of Bang’s close associates. Despite these claims, HYBE had already started IPO procedures, including applying for a designated auditor, a necessary step to take before listing.
What’s particularly concerning is that Bang had a profit-sharing agreement with the PEF. Under this deal, he was entitled to receive about 30% of the investment profits, which reportedly netted him around ₩400 billion KRW (about $291 million USD). However, this contract was not disclosed in the IPO filings, raising red flags about transparency and fairness.

So basically they’re being accused of something more akin to securities fraud than insider trading.

The financial watchdog reportedly suspects that the case may constitute fraudulent and unfair trading practices that undermine capital market order, and is preparing to refer the case to the prosecution through a fast-track process for an expedited investigation.

HYBE responded to the controversy at the time by stating that all transactions were conducted legally after thorough legal reviews.

While some outlets are using the bombastic maximum sentence of life in prison, he does face potential jail time if convicted.

If the allegations are confirmed, Bang could face severe legal consequences, as 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.

Following this news, it was reported that a couple days ago the Korean police applied for a search and seizure warrant. HYBE has yet to respond to the warrant against Bang Si Hyuk himself. Please don’t tell me this is why he’s doing all the seemingly weekly cringe “he lost weight” mediaplay shit.

All of this initially emerged back in December of last year, though I was probably busy covering other messes.

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Remarkably, that’s not all, as there’s a separate financial fraud investigation ongoing at HYBE. For that one they did respond in a probe into a different HYBE employee who is suspected of insider trading.

According to the sources, the Seoul Southern District Prosecutors’ Office recently searched HYBE’s headquarters in central Seoul to investigate allegations that an executive gained illicit profits worth 240 million won ($176,500) through stock trading using insider information.
The executive, whose identity was withheld, is suspected of purchasing shares of YG Plus, an affiliate of another K-pop powerhouse YG Entertainment, after learning of HYBE’s plan to invest in the company.

In response, they clarified that the person being investigated is a former employee.

On May 30, KST, HYBE published a formal statement addressing this search and seizure by the authorities. The K-pop giant told SPOTV that they cooperated with the authorities in executing the search and seizure warrant, but clarified that “A” was a former employee at the company.

It’s suspected that the employee in question is not just a random but Lee Kyung Joon, former CFO of HYBE and ADOR internal director until recently, which has raised suspicions.

Almost impressive in a way.