Travel Ban Imposed on HYBE Chairman Amid Allegations of Stock Fraud
In a significant development, Bang Si-Hyuk, the chairman of South Korea’s entertainment powerhouse HYBE, is currently under a travel ban instituted by local authorities. This action is part of an investigation into alleged stock fraud connected to the company’s initial public offering (IPO) in 2020.
Investigation Details and Allegations
The Seoul Metropolitan Police Agency’s Financial Crimes Investigation Division confirmed on Wednesday that the travel restriction was enforced when Bang returned from a trip to the United States on August 11. He must now remain in the country as he cooperates with the investigation into potential violations of the Financial Investment Services and Capital Markets Act.
Authorities are looking into accusations that Bang misled early investors back in 2019 by assuring them that HYBE had no intentions of going public. These investors, believing the company would stay private, sold their shares to a special purpose company linked to a private equity fund associated with HYBE executives. Allegations have surfaced that, unbeknownst to these investors, HYBE was already gearing up for its IPO.
Financial Gains and Legal Implications
Once HYBE initiated the IPO process, the special purpose company sold the acquired shares for a profit. Bang is accused of benefiting significantly from this arrangement, allegedly pocketing around 30 percent of the profits under undisclosed terms, translating to nearly 190 billion won (approximately US$138 million).
Timeline of the Investigation
This investigation officially commenced in late 2022 following internal tips. By June 30, detectives conducted a search of the Korea Exchange in Yeongdeungpo District, confiscating documents pertinent to HYBE’s IPO review. Further investigation on July 24 led to a raid at the company’s headquarters in Yongsan District, where additional records were collected.
Bang’s Response and Legal Framework
Bang appeared for questioning as a suspect on September 15 and returned on September 22. Prior to his initial session at the Seoul Metropolitan Police Agency, he expressed remorse for the concerns caused by the investigation, asserting his commitment to full cooperation. His legal team, however, maintains that all IPO procedures adhered to the law, contesting any allegations of malpractice.
According to South Korea’s Capital Markets Act, disseminating false information regarding unlisted securities to secure financial benefits is illegal. Offenses involving illicit profits exceeding 5 billion won can lead to severe penalties, including prison terms ranging from five years to life. The travel ban on Bang is a routine precaution employed in high-profile financial cases to prevent suspects from fleeing the jurisdiction while investigations progress.
Impact on HYBE and Share Market
HYBE, renowned for managing global stars like BTS, has refrained from commenting in detail about the ongoing investigation, stating only its intent to comply with requests from law enforcement. Following the announcement of the travel restriction, the company’s stock has seen a slight decline, signaling investor trepidation over the potential ramifications of these legal troubles.
Next Steps and Future Developments
The investigation remains active, with authorities reviewing the seized materials and interviewing witnesses. Depending on the findings, the case against Bang may progress to the prosecution stage later this year. Currently, the travel ban remains in place, highlighting the gravity of the allegations regarding possible misuse of insider information for personal advantage.
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