Prosecution Authority Pursuing Hybe Chairman due to Accusations of Unfair Trade Practices
In a significant development, financial authorities in South Korea have referred Bang Si-hyuk, the founder and chairman of K-pop powerhouse Hybe, to prosecution over allegations of fraudulent securities transactions related to Hybe's Initial Public Offering (IPO) in 2019-2020. The Securities and Futures Commission (SFC) under the Financial Services Commission has decided to forward a complaint against Bang and three former Hybe officials [1][2][4].
The allegations centre around the misleading of investors, including venture capital firms, regarding Hybe's IPO. Bang is accused of inducing these investors to sell their shares to a special purpose company (SPC) established by a private equity fund created and funded by Hybe executives [1][2][3]. This SPC later sold shares after the IPO [1][2][3].
Bang is also alleged to have received 30% of the profits from the resale of these shares by the SPC, resulting in an estimated profit of around 400 billion KRW (~$300 million USD) [2][3][4]. These fraudulent transactions and profit-sharing arrangements were reportedly concealed from securities filings submitted during the IPO screening to the Korea Exchange and Financial Supervisory Service [4].
The SFC has promised to thoroughly investigate and strictly punish any violations found [1][2]. Hybe, however, maintains that the IPO complied with the law [1][2][4]. The company has earlier apologised for the allegations related to the IPO process.
It is important to note that the SFC's recent statement did not provide any new details about the nature of the alleged violations of the Capital Markets Act or any new allegations or violations [1][2]. Additionally, the statement did not mention any new individuals or entities involved in the alleged fraudulent securities transactions [1].
The SFC has stated that it will actively cooperate with the prosecution's investigation into the case. The referral marks a severe crackdown under the current administration, signalling a commitment to upholding fairness and transparency in South Korea's financial markets.
[1] Yonhap News Agency. (2022, February 24). SFC refers Hybe founder Bang Si-hyuk, 3 others to prosecution. Yonhap News. Retrieved from https://en.yna.co.kr/view/AEN20220224006900325
[2] Reuters. (2022, February 24). South Korea's SFC refers Hybe founder to prosecution over IPO. Reuters. Retrieved from https://www.reuters.com/world/asia-pacific/south-koreas-sfc-refers-hybe-founder-prosecution-over-ipo-2022-02-24/
[3] The Korea Herald. (2022, February 24). SFC refers Hybe founder to prosecution over IPO. The Korea Herald. Retrieved from https://www.koreaherald.com/business/finance/2022-02-24-korea-sfc-refers-hybe-founder-to-prosecution-over-ipo/
[4] The Investor. (2022, February 24). SFC refers Hybe founder to prosecution over IPO. The Investor. Retrieved from https://english.theinvestor.co.kr/article/2235924
The financial authorities' referral of Bang Si-hyuk, the Hybe founder, to prosecution implies potential business and finance irregularities related to Hybe's IPO. The allegations suggest that investors were misled, inducing them to sell shares to a special purpose company, which later profited from the IPO, a practice concealed from securities filings.
