4 days ago
Could HYBE founder Bang Si-hyuk face life sentence in jail for alleged fraud? Here's all you need to know
Ahead of BTS' discharge from military service, its record label and talent agency HYBE is in the middle of a controversy as founder and chairman Bang Si-hyuk could face investigation by prosecutors over alleged fraudulent activities. As per a KED Global report, in 2019, Si-hyuk misled shareholders by telling them that the company didn't have plans to go public, but later proceeded with an initial public offering. (Also Read | Waiting for BTS World Tour 2025? HYBE CEO shares details on when band will reunite)
The Seoul Metropolitan Police Agency has already submitted a warrant request to prosecutors for the search and seizure of HYBE's office. The Financial Supervisory Service has reportedly obtained evidence that Si-hyuk misled shareholders.
In 2019, after HYBE informed its existing shareholders that it had no plans to go public, some investors divested their stakes. HYBE, then, started a process to go public after Si-hyuk allegedly signed a private shareholders' agreement with local PEFs — STIC Investments Inc., Estone Equity Partners and New Main Equity — to share profits from a future listing. This deal remained undisclosed until HYBE's stock plunged immediately after its IPO.
While investors met with heavy losses from the post-IPO sell-off, Si-hyuk reportedly received 400 billion won ($289.3 million) from the PEFs based on the confidential arrangement. HYBE has found itself in troubled waters over the alleged failure to disclose the profit-sharing agreement between Si-hyuk and the PEFs. This could be a violation of disclosure rules under the Capital Markets Act. The Financial Supervisory Service is conducting a fast-tracked investigation into Si-hyuk's transactions with the PEFs.
If Si-hyuk is prosecuted and convicted of fraudulent disclosure and illicit gains, he could be jailed for five years or more. He reportedly could also face a life sentence if the profit exceeds 5 billion won, in accordance with the Capital Markets Act.
Meanwhile, prosecutors have already raided the HYBE Seoul headquarters over an insider trading probe involving one of its employees. The person is being investigated for allegedly using nonpublic information to gain approximately 240 million won in illicit profits.
