HYBE’s founder and chairman, Bang Si-hyuk, returned to Seoul on Monday (August 11) to face a police investigation over alleged securities fraud connected to the company’s 2020 initial public offering.
South Korean news outlets Maeil Business Newspaper and Nate today (August 12) reported that the music executive arrived at Incheon International Airport from the US Monday afternoon.
HYBE confirmed to Nate that Bang returned to Korea and that they “plan to cooperate with the police investigation as much as possible and will faithfully undergo the investigation.”
His reported return comes just days after Bang told employees in a leaked internal email that he planned to return to Seoul to face authorities investigating him for securities fraud. Bang acknowledged that his extended absence abroad may have contributed to “confusion and frustration” within the company.
Bang told staff: “I will return to Korea to fully and transparently work with investigators and put these allegations to rest.”
As MBW previously reported, regulators have referred Bang and three other executives to prosecutors for a probe into alleged “unfair trading” tied to the company’s 2020 IPO.
According to Korea Economic Daily, investigators are looking into whether Bang unjustly profited by misleading investors, including venture capital firms, into thinking the IPO would be delayed.
Regulators stated that the IPO plans were actually on track, with HYBE even hiring an auditor. However, investors, believing there would be a delay, reportedly sold their shares to a special purpose company supported by HYBE’s executives.
This company then sold its shares after the IPO, and regulators allege Bang received 30% of the profits, or approximately 190 billion won (USD $137 million at the current exchange rate). This figure is lower than the previously reported 400 billion won ($288m).
The Korea Herald notes that fraudulent trading, resulting in profits or avoided losses of over 5 billion won ($3.6m), can lead to a five-year to life prison sentence.
Bang, who founded Big Hit Entertainment in 2005 before it was renamed to HYBE in 2021, had told staff: “I feel a deep sense of regret knowing that our members and artists, who should be focused solely on their creative and professional goals, might be suffering because of this situation.”
HYBE is also facing a tax probe by South Korea’s National Tax Service (NTS) as authorities look into potential violations related to its IPO. Multiple news outlets out of South Korea, including Korea JoongAng Daily and The Korea Herald reported on July 29 that tax officials visited HYBE’s Seoul headquarters to gather documents and related materials.
In a separate development this week, Korean media Field News reported that the NTS deployed two investigation teams to HYBE, launching a 90-day special tax probe. The investigation team is reportedly conducting a detailed analysis of relevant accounting data.
Field News said the investigation may take up to 120 days to complete, and may be extended depending on the circumstances. The report said HYBE has appointed Kim & Jang Law Firm as its tax agent to respond to the investigation.
When contacted by Field News, HYBE said: “We ask for your understanding that it is difficult to express a company position on this matter as it is currently under tax investigation.”
HYBE recently reported a 10.2% YoY jump in Q2 revenue to 705.6 billion South Korean won ($508m), while operating profit jumped 29% YoY to 65.9 billion won ($47m).
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