The investigation into HYBE chairman Bang Si Hyuk has reportedly hit a major roadblock.
Prosecutors have found it difficult to prove a fraudulent trading charge against Bang and have advised police to consider other charges, including fraud, according to the Law Times on July 8th.
The case centers on allegations tied to HYBE’s 2019 IPO process. Bang is suspected of misleading early investors by telling them the company had no listing plans, or that the listing would be delayed, while allegedly arranging for their shares to be bought through a private equity fund and special purpose companies.
Police believe Bang later sold the shares and received about 200 billion won (approximately $132 million), equal to 30% of the sale profits.
The Seoul Metropolitan Police Agency requested an arrest warrant for Bang twice in April, but both requests were rejected. Prosecutors reportedly cited a lack of evidence to clearly establish the facts.
According to the report, prosecutors believe the evidence gathered so far would make it difficult to bring a fraudulent trading case under the Capital Markets Act. To prove that charge, investigators would need to show that Bang’s alleged actions distorted the capital market system and harmed market order.
One key question is whether Bang used special purpose companies to buy shares from investors in order to get around lock-up rules, which limit major shareholders from selling stock after a company goes public.
Police have not publicly detailed where the investigation goes next. After the arrest warrant requests were rejected, the National Office of Investigation said it was still reviewing the extensive additional work requested by prosecutors.
Prosecutors are also conducting a separate, parallel investigation through special judicial police officers from the Financial Supervisory Service, meaning they could still reach their own conclusion apart from the police probe.
Under the Capital Markets Act, anyone who gains more than 5 billion won in illegal profits through a fraudulent scheme can face life imprisonment or at least five years in prison.
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