BTS agency chairman Bang Si Hyuk faces indictment over alleged 400 billion KRW stock fraud, HYBE reacts
On July 9, financial regulators confirmed that the Capital Market Investigation Deliberation Committee (CMIDC) had reviewed the case. The CMIDC operates under the Financial Services Commission's (FSC) Securities and Futures Commission (SFC). After deliberation, the committee voted to escalate the matter.
The CMIDC's decision to forward Bang's case to the SFC indicates the severity of the allegations. The SFC is set to make the final call during its scheduled regular meeting on July 16. If it sides with the committee's recommendation, Bang Si Hyuk may face criminal charges for fraudulent and unfair trading under Korea's Capital Markets Act.
HYBE responds
Shortly after the news broke, HYBE issued an official statement addressing the investigation. The company began by expressing regret over the negative attention surrounding its IPO process. They acknowledged the concern it may have caused the public and investors.
HYBE emphasized that it is 'actively cooperating with financial regulators and the police by providing detailed explanations and relevant materials related to the matter'. According to the agency, it remains confident that the public listing followed all legal requirements in place at the time. However, it also admitted that the process of clearing the allegations could take time.
What sparked the investigation into HYBE's IPO dealings?
The controversy dates back to 2020, before HYBE (then operating as Big Hit Entertainment) debuted on the stock market. According to investigative sources and reports from the investment sector, Bang Si Hyuk allegedly signed confidential shareholder agreements with several private equity firms. These included Stick Investment, Eastone Equity Partners, and Newmain Equity. The agreements were made months before HYBE's public listing.
These agreements reportedly included a profit-sharing clause. It stated that Bang would receive 30% of the capital gains if the company successfully went public within a specific timeframe. If the IPO failed, Bang would be obligated to repurchase the shares at their original price, limiting the risk for the PEFs.
HYBE did launch its IPO during the agreed period, and Bang is said to have earned over 400 billion KRW as a result of this setup. However, these deals were never publicly disclosed during the IPO process.
HYBE and the underwriters were reportedly aware of the arrangements. However, they concluded, based on legal counsel at the time, that the agreements did not fall under mandatory disclosure requirements. Critics now argue that omitting this information deprived early investors of full transparency and may have influenced share prices and decisions.
Search warrants for HYBE denied twice
As the issue gained traction, early investors began voicing frustration, claiming they suffered financial damage due to the lack of information. Public pressure intensified, prompting both financial regulators and law enforcement to launch separate investigations into the matter.
Law enforcement authorities have already attempted twice to secure search warrants for HYBE, but prosecutors rejected both requests. The outcome of the July 16th meeting will likely determine whether Bang Si Hyuk is formally prosecuted for his role in the alleged misconduct.
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