3 days ago
Explained: Why BTS' label Hybe's chairman is facing life imprisonment over fraud allegations
BTS fans around the world are eagerly waiting for the K-pop band's reunion after the remaining members are released from military duty in June. However, Bang Si-hyuk, the man who formed BTS, is currently under investigation after being accused of fraudulent and unfair trading practices.
According to Korean media outlets, Bang Si-hyuk, 52, is being investigated by the Financial Supervisory Service (FSS) for allegedly misleading investors and bagging about 400 billion won ($289 million) during the company's initial public offering (IPO) process.
Did Bang Si-hyuk deceive investors?
Sources say the FSS has evidence suggesting Bang may have engaged in deceptive practices involving private equity firms. Back in 2019, when Hybe was still known as BigHit Entertainment, existing shareholders were told there was had no immediate plans to go public, persuading some investors to sell their stakes to a private equity fund allegedly set up by an associate.
However, the company simultaneously began the process to go public after Bang allegedly signed a private shareholders' agreement with local PEFs to share profits from a future listing, a deal that was not disclosed at the time.
While investors suffered heavy losses from the post-IPO sell-off, the private equity fund reaped a large profit after the company went public. The alleged gains from the scheme are estimated at around 400 billion won ($290 million).
The BigHit IPO filed in October 2020 increased Bang's net worth to $2.8 billion, reportedly making him the only billionaire in South Korea's entertainment industry and the sixth-richest person in the country.
Could it lead to life imprisonment?
The FSS is investigating Bang's transactions with the PEFs and plans to refer the case to prosecutors for potential criminal prosecution, according to KED Global. HYBE's alleged secret profit-sharing agreement between Bang and the PEFs could constitute a violation of disclosure rules under the Capital Markets Act.
If found guilty, Bang could face a prison sentence of five years or more, or a life sentence, if the profit exceeds 5 billion won.
Meanwhile, BTS ARMY around the world are eagerly waiting for the seven band members to reunite. While j-hope and Jin have already completed their mandatory military service, Jungkook, Jumin, V, RM and Suga are set to be released from their duties in June.
