South Korea's top financial watchdog plans to refer Bang Si-hyuk, founder and chair of Hybe and chief producer behind the K-pop sensation BTS, to the prosecution for alleged fraud charges related to the listing of the entertainment powerhouse.
Following a decision made by a subordinate committee to refer Bang to the prosecution made earlier this week, the Securities and Futures Commission under the Financial Supervisory Service is to deliberate on the case through a meeting slated for next week. Authorities view the preliminary decision as unlikely to be overturned.
The SFC is an independent deliberation committee under the FSS, responsible for reviewing violations of securities law and recommending sanctions. Referring cases for prosecution is a top-level action taken by the committee.
The FSS has been conducting a probe on allegations that Bang misled early investors of Hybe (then Big Hit Entertainment) in 2019 by claiming there were no plans to list the K-pop agency. The investors reportedly then sold their shares of Hybe to a private equity fund, which was closely connected to Bang.
The FSS views that Hybe was preparing for an initial public offering at the time, even designating an auditor for the listing.
The value of Hybe shares surged when it later went public, leaving the initial investors with significant losses. Hybe made its market debut on the benchmark bourse Kospi in October 2022, receiving a valuation of 4.8 trillion won ($3.5 billion).
Furthermore, Bang reportedly received around 400 billion won after agreeing to share 30 percent of the stock sale profit with the private equity fund. The details of the shareholder agreement were not disclosed during the IPO process, which would be a violation of the Capital Markets Act.
The FSS is examining whether Bang’s statements constituted false disclosures and key information related to the IPO was intentionally withheld. It summoned Bang in late June to question him on alleged irregularities.
Financial authorities suspect that Bang may have used a private equity fund to circumvent lock-up regulations designed to prevent major shareholders from offloading large amounts of stock.
"We sincerely apologize for causing concern regarding matters related to the IPO process," Hybe stated Wednesday, reiterating its stance that there was no wrongdoing regarding the listing.
"Although it may take some time, we will make every effort to prove that the IPO was carried out in full compliance with relevant laws and regulations.”
Separately, the Seoul Metropolitan Police Agency has been conducting an investigation on Hybe for alleged violations of the Capital Markets Act as well. The authorities are looking into whether any unlawful transactions took place during Hybe’s listing process.
silverstar@heraldcorp.com
