The financial authorities have reported Bang Si-hyuk, Chairman of HYBE, to the prosecutors for suspicion of fraudulent transactions during the listing process.
The Securities and Futures Commission (SFC) under the Financial Services Commission announced on the 16th during a regular meeting that it has reported and notified the prosecutors of Chairman Bang's violation of the Capital Markets Act regarding the prohibition of fraudulent transactions. The SFC also took the same action against former HYBE executive A.
The SFC is an independent deliberative body under the Financial Services Commission that decides on whether to report or notify investigative agencies for administrative sanctions such as fines and criminal penalties.
It is expected that the SFC will not overturn the opinion of prosecution unless significant defects are found, as it generally accepts self-regulatory opinions. A report to the prosecutors is the highest level of sanction that financial authorities can impose.
According to the SFC, Chairman Bang is suspected of misleading existing investors, including venture capitalists (VCs), into believing that the initial public offering (IPO) plan would be delayed before HYBE's listing in 2019, leading to the sale of shares to a special purpose company (SPC) established by a private equity fund (PEF) that HYBE executives invested in and founded.
Investors sold their shares to the SPC based on Chairman Bang's statements, but the financial authorities believe that HYBE was in the process of applying for a designated audit, a preliminary procedure for the IPO, during this time.
After HYBE's listing, the SPC sold its shares, and Chairman Bang shared 30% of the sale profits from the SPC according to a prior shareholder agreement. The unjust profits are reported to amount to around 190 billion won.
However, HYBE did not include this contract information in its securities registration statement, leading to controversy.
HYBE stated, "We believe we have clarified the matters that the financial authorities are curious about," while maintaining that "all transactions were conducted legally after legal review" regarding the allegations.
