BTS producer becomes first tycoon referred to prosecution under new president's toughened financial oversight
South Korea's financial regulators have referred Hybe Chairman Bang Si-hyuk to the prosecution on charges of fraudulent trading, accusing him of misleading shareholders during the company's initial public offering and profiting nearly 400 billion won ($287.6 million) in the process.
This marks the first time under the Lee Jae Myung administration that authorities have taken such strong disciplinary action against the head of a major conglomerate. Regulators reportedly gave Bang an unusual opportunity to appear in person and explain himself, but he declined to attend.
The Financial Services Commission's Securities and Futures Commission held a regular meeting Wedneday and announced that it had referred Bang and former Hybe executives to prosecutors on suspicion of violating the Capital Markets Act, particularly its ban on unfair trading practices.
A referral to the prosecution is the most severe action financial regulators can take against an individual accused of violating the law, in addition to administrative penalties. Under the Capital Markets Act, a person who gains or avoids losses of over 5 billion won through unfair trading may face a prison term of five years to life.
'The suspects circumvented the lock-up period meant to prevent major shareholders from offloading shares immediately after listing, and dumped their shares on the market for profit. The nature of this violation is particularly serious,' a financial authority official said via local media outlet. 'The stock price plunged afterward, causing significant harm to ordinary retail investors.'
Hybe said it would actively work to clarify the suspicions and restore market trust.
'It is unfortunate that the financial regulators did not accept the major shareholder's explanation during the Financial Supervisory Service's investigation, in which he made clear he did not pursue personal gains based on the company's IPO,' Hybe said in a statement sent to The Korea Herald on Thursday.
'Nevertheless, we respect the decision and will do our utmost in the upcoming investigation to actively address the allegations and recover the trust of the market and our stakeholders,' the company added.
According to authorities, Bang allegedly deceived early investors into selling their shares by falsely claiming that Hybe's IPO prospects in 2019 were bleak. He is also believed to have signed a private agreement with a private equity fund that had acquired a large stake in the company, pledging to share 30 percent of any future gains from selling his shares — eventually profiting nearly 400 billion won.
In response to this type of misconduct, the Korea Exchange revised its IPO due diligence checklist late last year, adding requirements for underwriters to inspect contracts between shareholders and assess risks to investor protection.
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