HYBE Corporation is once again in the spotlight, this time for serious allegations against its chairman, Bang Si-hyuk. South Korea’s Financial Supervisory Service (FSS) is reportedly preparing to formally request a criminal investigation into Bang Si-hyuk for an alleged fraudulent securities transaction valued at 400 billion KRW (approximately $290 million). This high-stakes case could potentially lead to severe penalties, including life imprisonment under the Capital Markets Act.
According to industry sources, the FSS’s Investigation Department 2 has uncovered evidence suggesting that in 2019, Bang Si-hyuk misled existing HYBE investors. It’s alleged that he informed them there were no immediate plans for an Initial Public Offering (IPO), prompting these investors to sell their shares to a private equity fund (PEF) established by an associate of Bang Si-hyuk. Simultaneously, HYBE was reportedly taking concrete steps towards an IPO, including applying for a designated auditor – a crucial step for public listing.
The FSS has determined that these actions likely constitute fraudulent unfair trading under the Capital Markets Act. Further complicating matters, Bang Si-hyuk reportedly entered a profit-sharing agreement with the PEF, through which he allegedly received approximately 30 percent of the investment returns, ultimately securing around 400 billion KRW. Crucially, these significant shareholder agreements were not disclosed in HYBE’s official IPO filings.
This isn’t the only authority looking into the matter. The Financial Crime Investigation Unit of the Seoul Metropolitan Police Agency is conducting a separate investigation, indicating the gravity and multi-faceted nature of the allegations.
If these violations are confirmed, Bang Si-hyuk could face severe legal repercussions. Article 443 of the Capital Markets Act imposes stringent penalties, including life imprisonment or a minimum of five years in prison, particularly if the illicit gains exceed 5 billion KRW. The financial industry is closely watching the unfolding situation, as the outcome of this case could significantly impact investor confidence in South Korea’s capital markets. Experts warn that tolerating undisclosed profit-sharing deals between major shareholders and private equity funds could seriously undermine market integrity.
A financial industry expert highlighted that the HYBE case appears to be a textbook example of fraudulent dealings linked to IPO processes. The expert emphasized the urgent need for a robust regulatory response to prevent similar incidents from becoming more prevalent.
This investigation sheds light on the dealings that occurred between 2018 and 2019, when prominent investment firms like STIC Investment, Easton PE, and New Main Equity acquired substantial shares in HYBE from early investors, including LB Investment and AlpenRoute Asset Management. Prior to these acquisitions, existing investors had reportedly urged HYBE to proceed with IPO preparations, but were allegedly informed by Bang Si-hyuk and other HYBE executives that a public listing was not feasible at that time.
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