Financial watchdog to refer HYBE Chairman to FSC for fraudulent transactions

The Financial Supervisory Service plans to refer HYBE chairman Bang Si-hyuk to the Financial Services Commission’s investigative arm for suspected violations of the Capital Markets Act tied to HYBE’s initial public offering.

Bang Si-hyuk, founder and chairman of K-pop agency HYBE, attends a conference held in Yeongdeungpo District, western Seoul, on Feb. 20. [NEWS1]

Korea’s Financial Supervisory Service (FSS) plans to refer Bang Si-hyuk, chairman of HYBE, to the Financial Services Commission’s (FSC) investigative arm for suspected violations of the Capital Markets Act, accelerating its push for criminal charges tied to HYBE’s initial public offering (IPO).

The FSS intends to submit a report to the FSC’s Securities and Futures Commission (SFC) recommending that Bang be indicted on charges of fraudulent transactions under capital markets law, the Korea Economic Daily reported Thursday while citing industry insiders.

The move follows months of investigation into Bang’s alleged deception of HYBE shareholders during the firm’s listing process. Police raided the Korea Exchange on Monday to seize data related to the firm's IPO screening.

The FSS reportedly initially considered using a fast-track procedure to hand the case directly to prosecutors but instead decided to complete a thorough probe and seek a formal SFC resolution, which would ensure legal and procedural legitimacy.

The regulator summoned Bang for questioning late last month. Investigators reportedly gathered substantial evidence that Bang and officials from HYBE, then BigHit Music, told early investors there were no IPO plans, all the while preparing for a listing.

HYBE's logo as seen at its office in Yongsan District, central Seoul, on Feb. 26. [YONHAP]

Bang is accused of assuring investors that there would be no public offering in 2019 and encouraging them to sell their shares to a private equity fund (PEF) owned by his associate, even as preparations for the IPO were underway.

The HYBE executive is alleged to have made a deal to take 30 percent of the PEF's investment profits, ultimately receiving 400 billion won ($294 million) after the firm went public in October 2020. This arrangement was not disclosed in the company’s securities filings.

BY KIM JU-YEON [kim.juyeon2@joongang.co.kr]