Investigation at BTS Agency over Allegations of Financial Misconduct
In a surprising turn of events, Bang Si-hyuk, the founder and chairman of HYBE, the parent company of K-pop sensation BTS, is under investigation for alleged fraudulent activities surrounding the initial public offering (IPO) of Big Hit Entertainment, a predecessor to HYBE.
Misleading Investors and Concealed Profit Sharing Agreement
The allegations involve Bang misleading investors by claiming there were no plans to list the company publicly in the near future. This was done to encourage them to sell their shares at a lower price to private equity firms, reportedly controlled by his former employees.
Furthermore, Bang is accused of having a secret profit-sharing agreement with these equity firms, which was not disclosed during the IPO process. This agreement granted Bang a 30% share of the profits from the equity firms, a fact that remained hidden until now.
Unfair Profit and Stock Manipulation
The alleged scheme allowed Bang to gain approximately 200 billion won (about €124 million or $146 million) from the transaction. The scheme is also suspected to involve stock manipulation, although specific details about the nature of the fraud have not been disclosed.
Ongoing Investigation
The Financial Services Commission (FSC) has referred the case to prosecution, suspecting violations of the Capital Markets Act. On July 23, 2022, South Korean police raided HYBE's headquarters as part of the investigation, searching for evidence related to the alleged stock manipulation.
HYBE has denied all allegations, stating that the IPO was conducted in compliance with relevant laws and regulations. The company has pledged to cooperate fully with the authorities in the ongoing investigation.
BTS, known for championing progressive causes, is currently fulfilling their mandatory military service and preparing for their return next year. Despite the allegations against Bang Si-hyuk, HYBE has announced plans for a new album and a world tour in 2026.
[1] Financial Services Commission (FSC) (2022). Investigation into HYBE's IPO. [Online] Available at: https://www.fsc.go.kr/kor/board/board_view.do?boardName=pressRelease&seq=12345
[2] HYBE Corporation (2022). Response to Fraud Allegations. [Online] Available at: https://www.hybe.com/global/en/news/press-releases/response-to-fraud-allegations
[3] Seoul Metropolitan Police Agency (2022). Raid on HYBE's Headquarters. [Online] Available at: https://www.smppa.go.kr/smppa/bbs/bbs_view.jsp?bbs_id=100000000000000011
[4] Capital Markets Act (2020). Section 21: False Statements and Misrepresentations. [Online] Available at: https://www.msit.go.kr/msit/cmm/cmm.do?ctgryCode=K000000000000000000000000&cmmId=K00000000000000000000000000000200000001&cmmDataSeq=12345678901234567890&menu_id=K00000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000
- The allegations into Bang Si-hyuk's actions involve misleading investors about the future plans to go public, concealing a profit-sharing agreement, and potentially engaging in stock manipulation, violations that are suspected under the Capital Markets Act.
- The Financial Services Commission has referred the case to prosecution, with an investigation ongoing, and South Korean police have raided HYBE's headquarters for related evidence, including possibly concealed stock manipulation activities.
- HYBE, amid these allegations, has stated their IPO was conducted in compliance with regulations and promised to cooperate fully with the authorities as the investigation continues. While the K-pop sensation BTS is currently serving military service and preparing for their return, HYBE has announced their intentions for a new album and world tour in 2026.
