25.07.24.Today News : Police Raid HYBE HQ Amid Bang Si-hyuk's Stock Fraud Allegations

Police Raid HYBE HQ Amid Bang Si-hyuk's Stock Fraud Allegations

• HYBE founder under investigation for misleading investors during IPO preparations

Bang Si-hyuk, chairman and founder of HYBE, is under police investigation for allegedly engaging in fraudulent stock transactions prior to the company’s IPO. On July 24, police launched a raid on HYBE’s headquarters as part of a widening probe into the case, which involves suspected unlawful gains worth hundreds of billions of won.

Hive Entertainment chairman Bang Si-hyuk is under police investigation for allegedly engaging in fraudulent stock trading ahead of his company's initial public offering (IPO).

The Seoul Metropolitan Police Agency’s Financial Crimes Unit dispatched investigators to HYBE’s headquarters in Yongsan District on the morning of July 24 to conduct a search and seizure operation. The raid stems from allegations that Bang Si-hyuk misled early investors about the company’s IPO plans in 2019 while secretly preparing for the public offering.

At the time, Bang reportedly told venture capital (VC) firms and other early stakeholders that HYBE had no plans to go public, convincing them to sell their shares to a private equity fund (PEF) he had established. Police suspect that while this was taking place, HYBE had already taken necessary steps for an IPO, including securing a designated auditor, a required move for listing.

The investigation also uncovered a profit-sharing agreement in which Bang would receive 30% of the capital gains from the shares acquired by the PEF. Following HYBE’s IPO, Bang is believed to have earned several hundred billion won through this arrangement.

Although police began investigating Bang in December 2023, their attempts to secure a search warrant for the Korea Exchange were twice denied by the Seoul Southern District Prosecutors’ Office due to an ongoing probe by the Financial Supervisory Service (FSS). A third request was approved, leading to a successful raid of the Korea Exchange on June 30, where relevant documents were secured.

Meanwhile, the FSS’s special judicial police are also investigating Bang for the same charges. On July 16, the Financial Services Commission’s Securities and Futures Commission referred Bang to prosecutors, sparking a jurisdictional dispute between prosecutors and police. While police invoked Article 197-4 of the Criminal Procedure Act to request the transfer of the case, prosecutors responded that both investigations would proceed simultaneously.

A central issue in the case is whether Bang used a PEF to bypass the mandatory lock-up period for major shareholders after an IPO. While shares held directly by large stakeholders are restricted from being sold immediately post-IPO, shares held via PEFs are not subject to the same rules. Regulators and law enforcement view Bang’s actions as a form of novel unfair trading in violation of Article 178 of the Capital Markets Act, which broadly regulates such misconduct.

As the investigation continues, the outcome is expected to have major implications for corporate transparency and the regulation of capital markets in Korea.

One-line summary : Bang Si-hyuk is under police investigation for allegedly misleading investors before HYBE's IPO and profiting by hundreds of billions of won.