Police have referred HYBE (352820.KS) Chairman Bang Si-hyuk and other officials to prosecutors over allegations they misled shareholders into selling their stakes during the company's initial public offering, reaping about 263.1 billion won in gains. Police described the case as an organized and premeditated financial and securities crime involving specialists from various fields of the capital market.
The Financial Crime Investigation Unit of the Seoul Metropolitan Police Agency's Metropolitan Investigation Bureau referred Bang and four other HYBE executives to prosecutors on the morning of the 3rd without detention on charges of fraudulent unfair trading under the Financial Investment Services and Capital Markets Act. The referral comes about 21 months after police opened a preliminary inquiry into Bang in December 2024.
Police said they searched HYBE and private equity funds and confirmed that Bang and others told existing shareholders there was no listing plan and urged them to sell their stakes to a private equity fund, even though preparations for a listing were under way. The private equity fund, meanwhile, recruited investors by guaranteeing a confirmed listing and returns in order to buy out the existing shareholders' stakes.
Police concluded that Bang and the others gained about 263.1 billion won in illicit profits through the scheme. The figure was calculated from the proceeds of on-market sales after deducting distributions to limited partners, loan repayments, transaction taxes and fees. Police applied for a pre-indictment preservation order for forfeiture and obtained a court decision covering the full amount.
Police view the case as an organized and premeditated financial and securities crime involving specialists from various fields of the capital market. They said Bang thoroughly planned the scheme, staying in close contact with the private equity fund and issuing instructions from the early stages of the listing preparations.
"After A [Bang] ordered a listing as a way of raising funds for the company, they told existing shareholders from August to October 2019 that there was no listing plan while preparing for the listing behind the scenes," a police official said. "Based on all the evidence collected, we established that A was substantively involved on both sides, at company Gap [HYBE] and at the private equity fund."
For that reason, police applied the charge of fraudulent unfair trading under the capital markets law rather than fraud. Police said they determined that HYBE executives and private equity officials, acting under a shared goal of capturing listing gains, concealed from existing shareholders the listing information monopolized by management and obtained private gain — conduct they judged to be a disruption of capital market order that damaged the fairness and credibility of the market.
"Fraud is an individual crime, while fraudulent unfair trading infringes on a social legal interest," a police official said. "Police viewed the series of acts by Bang and the others as a single whole and applied the charge of fraudulent unfair trading."
The official added: "Applying fraud would require considering the deception of the existing shareholders, but our legal assessment was that it is difficult to conclude that these shareholders suffered financial damage as a result of being deceived." Police explained that because the existing shareholders exited with a certain level of profit, it was difficult to calculate damages for gains they failed to make.
Police also took into account that sentences for fraud are lighter than those for fraudulent unfair trading. "In the case of fraudulent unfair trading, when a prison sentence is imposed, the offender must pay a fine of three to five times the illicit gains," a police official said.
On the decision to refer the case without detention after two earlier arrest warrant requests failed to resolve differences with prosecutors, the official said: "We closely reviewed the requests for supplementary investigation from prosecutors, but concluded there were no additional grounds and decided to refer the case without detention." On why the investigation took about 21 months, the official said: "Because the fraudulent unfair trading provision originated in the United States, it took a long time to review overseas precedents and go through our internal review process."
Police also obtained an arrest warrant for former HYBE Chief Investment Officer Kim Joong-dong, who left the country just before the searches, and placed him on a wanted list and requested an Interpol red notice. "We confirmed the whereabouts through B's [Kim's] lawyer and requested that he appear in Korea, but received a reply that he would not comply," a police official said.
"We will continue to cooperate closely with prosecutors so that the suspects receive punishment commensurate with their crimes, and work to establish a fair capital market order in which the public can invest with confidence," a police official said.
