HYBE Chairman Bang Si-hyuk, 4 others referred to prosecution for $194-M illicit profits

HYBE Chairman Bang Si-hyuk (Instagram)

Korean police referred on Sept. 3 HYBE Chairman Bang Si-hyuk and four others to the prosecution for allegedly degrading investors and making illegal profits of 263.1 billion won (about $194 million) ahead of the entertainment company’s initial public offering (IPO) in 2019. 

The case was forwarded by the Financial Crimes Investigation Unit of the Seoul Metropolitan Police Agency to the prosecution without detention after they finished their investigation which took 20 months. 

The five individuals, consisting of Bang Si-hyuk, HYBE executives and private equity fund officials, were referred to the Seoul Southern District Prosecutors' Office on charges of fraudulent trading under Korea’s Capital Market Act.

According to the police, they are suspected of obtaining 263.1 billion won in illicit profits by deceiving existing shareholders into believing there were no plans for an IPO, purchasing their shares through a private equity fund, and then selling them after the listing.

Korean authorities requested an Interpol Red Notice and nationwide wanted notice against Kim Joong-dong, the former chief investment officer of HYBE who went into hiding after leaving the country just before a police raid. The police investigation against him has been suspended. 

The police investigated that the suspects started reviewing preparations for an IPO around April 2019, and then launched full-scale preparations for the listing in July of the same year by operating an IPO preparation team.

However, they said that from August to October of the same year, they pressured existing shareholders to sell their shares by explaining that there were no plans for an IPO.

In October and November 2019, they disclosed their listing plans to private equity fund investors, recruited investors to establish a private equity fund, and then purchased the shares of existing shareholders through a special purpose vehicle.

HYBE was listed on the securities market in October 2020, and the investigation allegedly showed that the suspects obtained illicit gains by selling all of their shares on two occasions: in October 2020 and between May and June 2021. 

"They obtained private gain by concealing listing information, which was monopolized by management, from existing shareholders under the common goal of acquiring listing profits. We determined this to be an act of disrupting the order of the capital market that undermined the fairness and reliability of the capital market,” a police official said. 

HYBE is one of the leading entertainment companies in South Korea, managing many popular K-pop artists.