HYBE Chair Bang referred to prosecutors over alleged unfair trading

South Korea’s financial watchdog has referred Bang Si-hyuk, founder and chairman of K-pop powerhouse HYBE Co., to prosecutors over alleged fraudulent stock trading linked to its initial public offering in 2020.

The Securities and Futures Commission, under the Financial Services Commission (FSC), said on Wednesday that it has filed a criminal complaint against Bang for violating rules prohibiting unfair trading under the Capital Markets Act. Three former HYBE executives were also referred to prosecutors on similar charges.

Referral to prosecutors is the most severe regulatory action that can be taken against individuals for alleged violations of the Capital Markets Act.

According to the FSC, Bang was suspected of misleading venture capitalists and other institutional investors by hinting at a delay in its listing plan.

Based on that information, the pre-IPO investors sold their shares to a special purpose company (SPC) created by a private equity fund backed by HYBE executives.

The watchdog said HYBE was in fact proceeding with its IPO at the time by hiring an auditor.

The SPC later sold its HYBE shares after the IPO, and Bang is alleged to have received 30% of the profit from the divestment through a pre-arranged shareholder agreement.

The deal allegedly involved local private equity firms including STIC Investments Inc., Estone Equity Partners and New Main Equity.

Regulators estimate Bang pocketed around 190 billion won ($137 million) from the transaction. They suspect Bang used the private equity fund structure to circumvent IPO lock-up restrictions designed to prevent major shareholders from selling shares immediately after listing.

“This case has drawn significant public interest,” the FSC said in a statement. “We will cooperate fully with the prosecution to ensure a thorough investigation and we will take firm action on any confirmed violations.”

HYBE said it would actively cooperate with the probe and reiterated that Bang did not pursue personal gain based on inside knowledge of the listing.

“The majority shareholder fully participated in the investigation and clearly explained that there was no attempt to seek private profit tied to the IPO,” the company said in a statement.

“It is unfortunate that this explanation was not accepted, but we respect the regulator’s decision and will work to restore trust through the legal process,” it added.

During the investigation, Bang failed to appear before the watchdog to respond to the allegations, according to the FSC.

Write to Yeonhee Kim at yhkim@hankyung.com
 


Jennifer Nicholson-Breen edited this article.