South Korea’s financial regulator has referred Bang Si-hyuk, chairman of Hybe, the K-pop agency behind BTS and NewJeans, to prosecutors on charges of fraudulent transactions during the company’s initial public offering (IPO) process.
The Securities and Futures Commission (SFC), under the Financial Services Commission, said on July 16 that it decided in a regular meeting to file a criminal complaint against Bang for allegedly violating the Capital Markets Act’s prohibition on unfair trading practices. Three former Hybe executives were also referred to prosecutors on similar charges.
Referring a case to prosecutors is the strongest sanction the regulator can impose on individuals suspected of capital markets violations.
According to the SFC, Bang allegedly misled early investors, including venture capital firms, in 2019 by suggesting that Hybe’s IPO would be delayed.
Those investors sold their stakes to a special purpose company (SPC) controlled by a private equity fund (PEF) set up by Hybe executives. However, at the time, Hybe was already moving forward with IPO preparations, including applying for a designated auditor — a key pre-IPO step.
After Hybe’s IPO, the SPC sold its shares on the open market, and Bang reportedly received 30% of the profit through a pre-arranged shareholder agreement. The illicit gains are estimated at around $1.36 million
Regulators suspect Bang used the private equity fund as a way to bypass IPO lock-up restrictions, which prevent major shareholders and executives from selling stock for a set period after listing.
The former executives allegedly abused their position as general partners of the PEF to pocket excessive profits under the guise of performance fees.
The regulator said it would fully cooperate with prosecutors to uncover the truth behind the high-profile allegations, adding, “We will conduct a thorough investigation and take strict action against any confirmed violations.”
Hybe said it would actively cooperate with the investigation to clear up the allegations. In a statement, the company said, “It is regrettable that the chairman’s explanation, that he did not pursue personal gain on the premise of an IPO, was not accepted.
We respect the regulator’s decision and will do our best to resolve the suspicions in the course of the investigation and restore trust with the market and stakeholders.”
