Why Is HYBE Chairman Bang Si-Hyuk Under Investigation?(Photo Credit –Instagram)
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On May 28, the Financial Supervisory Service (FSS) of South Korea conducted a criminal investigation into HYBE Corporation Chairman Bang Si-hyuk for allegedly masterminding a fraudulent securities transaction for roughly 400 billion KRW (approximately $290 million). The controversy briefly centres around the secret shareholder agreements formed before HYBE’s 2020 IPO.
As per reports online, these agreements may have bypassed regulatory disclosure rules and caused substantial financial losses for regular investors. Since the news broke out, fans of the K-pop community have been discussing the aftermath for groups under the HYBE label, including worldwide groups such as BTS, SEVENTEEN, and more.
However, it is important to know why the FSS is pinpointing Bang Si-Hyuk. Below are all the details regarding the recent criminal investigation surrounding HYBE Corporation and its chairman.
HYBE Corporation Chairman Bang Si-Hyuk Allegedly Indicted For Fraudulent Securities Activity
As per AllKpop, the FSS is investigating whether Bang Si-Hyuk, before HYBE’s initial public offering (IPO), had secret “earn-out” arrangements with private equity companies (PEFs), especially Stick Investment, EastStone Equity Partners, and NewMain Equity.
According to reports, Bang allegedly received 30% (securing around 400 billion KRW, approximately $290 million) of the proceeds from the sale of PEFs’ shares after the IPO due to these agreements. Since these agreements were not revealed throughout the initial public offering (IPO) process, the FSS is investigating possible violations of the Capital Markets Act and unfair trading practices, raising questions regarding the securities market’s fairness and transparency.
Earlier, within two weeks of HYBE’s October 2020 initial public offering (IPO), the company’s stock price fell by over 60%. Retail investors lost a significant amount of money due to their ignorance of the concealed agreements. Due to the opaqueness of these shareholder agreements, the protection of minority investors and the moral obligations of business executives have come under scrutiny.
[Exclusive] hybe’s bang si hyuk under double investigation for “fraudulent unfair trading”
Despite claiming “no IPO plans,” hybe requested a designated audit
Police have applied for a new search warrant pic.twitter.com/4Be52BPDNR
HYBE’s Official Statement Following The Controversy
Following the controversy, HYBE Corporation issued an official statement denying the charges. HYBE has denied any misconduct, claiming that the shareholder agreements were exempt from the law’s disclosure requirement at the time of the IPO.
The business insists that the primary shareholders remained the same and that the agreements were normal private transactions for an unlisted business. However, considering their possible effects on investor interests and market integrity, the FSS is closely examining whether these arrangements ought to have been disclosed.
If the violations are confirmed by the FSS, Bang Si-Hyuk might face several penalties under Article 443 of the Capital Markets Act. Since the inquiry has reached the point where criminal charges are possible, the FSS has thus far sent the case to the prosecution. The prosecution will decide whether to file formal accusations against Bang Si-Hyuk and other parties implicated.
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