HYBE Chairman Bang Si Hyuk has been indicted by prosecutors on charges of fraudulent and unfair trading.
The Securities and Futures Commission (SFC) announced that they have filed a complaint with the prosecution against nine individuals for violating the Capital Markets Act on July 16th. The complaint, announced during the SFC’s 14th regular meeting, includes HYBE’s largest shareholder, Bang Si Hyuk, as well as executives and related parties from three companies.
A referral to the prosecution is the highest level of sanction that financial authorities can impose on individuals suspected of violating the Capital Markets Act.
In response, HYBE stated to Newsen on July 17th, “We regret that the explanation from our largest shareholder that he did not seek personal gain from the planned IPO was not accepted during the Financial Supervisory Service investigation,” the company said. “We respect the decision of the financial authorities and will cooperate fully with the upcoming investigation to address these allegations and restore the trust of our market and stakeholders.”
According to the Securities and Futures Commission (SFC), Chairman Bang is suspected of deceiving investors, such as venture capitalists (VCs), in 2019 before HYBE’s public listing. The allegation is that he led them to believe the IPO plan would be delayed, then arranged for them to sell their shares to a Special Purpose Company (SPC) created by a Private Equity Fund (PEF) that HYBE executives had established and invested in.
Financial authorities have concluded that while the investors who trusted Chairman Bang’s statements were selling their stakes to the SPC, HYBE was already proceeding with its IPO process. This included taking preliminary steps such as applying for a designated audit.
After HYBE went public, the SPC sold its shares and made massive profits. Chairman Bang allegedly received about 30% of those profits, roughly 120 billion won ($86.3 million), based on a prior shareholder agreement. In total, the alleged illegal gains amounted to around 190 billion won ($136.7 million), including profits made by HYBE executives.
Amidst the growing controversy, it is noteworthy that five executives of STIC Investment, a first-generation domestic private equity fund management company that invested in HYBE during the same period, were confirmed to have received a total of 37.5 billion won ($26.9 million) in performance bonuses due to HYBE’s successful listing. In particular, Division Head Chae Jin Ho alone received 17 billion won ($122.3 million) in compensation and was additionally granted stock options. STIC Investment purchased a 12.2% stake in HYBE for 103.9 billion won ($74.7 million) in 2018 and recovered 961.1 billion won ($691.4 million) after the listing in 2021, recording a 9.25-fold return rate.
Financial authorities stated, “We plan to actively cooperate with the prosecutorial investigation to thoroughly uncover the suspicions related to this case, which is of high public interest,” adding, “We will thoroughly investigate and take strict action against any detected illegal activities.”
>> Bang Si Hyuk Questioned by Financial Regulators Over Alleged Fraud in HYBE IPO Deal
