HYBE Founder Bang Si-Hyuk Faces Investigation Over Alleged Pre-IPO Share Manipulation
South Korean authorities have raided the residence of HYBE founder and chairman Bang Si-Hyuk as part of an investigation into alleged fraudulent trading activities connected to the company's initial public offering. The Financial Supervisory Service's Special Judicial Police for Capital Markets conducted a two-day search and seizure operation at Bang's home and office on December 17-18, according to media reports, escalating scrutiny into transactions that allegedly occurred before HYBE's stock market debut in 2020.
Background and Context
The investigation centers on activities from 2019, when HYBE, then known as Big Hit Entertainment, was preparing for its public listing. South Korean regulators allege that Bang misled early investors by denying any IPO plans while simultaneously arranging share transfers through a special purpose company (SPC) linked to a private equity fund. The case falls under violations of South Korea's Capital Markets Act, which governs securities trading and investor protection. Following the company's successful IPO in October 2020, HYBE's market capitalization surged, making it one of South Korea's most valuable entertainment companies.
Key Figures and Entities
Bang Si-Hyuk, the visionary behind K-pop phenomenon BTS and HYBE's transformation into a multi-label entertainment powerhouse, faces scrutiny over his role in the alleged share manipulation scheme. According to court documents reviewed by investigators, the Seoul Southern District Court approved the freezing of approximately 157 billion KRW ($107 million USD) worth of Bang's HYBE shares on December 4, preventing him from disposing of these assets during the investigation. The Financial Supervisory Service (FSS) has led the probe through its specialized judicial police unit for capital markets, while prosecutors have reportedly referred Bang for formal charges related to securities law violations.
Legal and Financial Mechanisms
The alleged scheme involves the creation of a special purpose company by a private equity fund with connections to HYBE executives. Prosecutors claim that Bang convinced early investors to sell their shares to this SPC in 2019 by stating the company had no immediate IPO plans. However, when HYBE went public the following year, the fund sold its acquired shares at substantial profit. Under a pre-existing arrangement, Bang allegedly received approximately 30% of these earnings, amounting to around 190 billion won ($131.2 million). Such transactions, if proven, would represent violations of disclosure obligations and fair trading principles under South Korean securities law.
International Implications and Policy Response
The case against one of South Korea's most prominent business figures highlights ongoing challenges in corporate governance within the country's rapidly expanding entertainment sector. As Korean entertainment companies achieve global scale and attract international investment, regulatory scrutiny of pre-IPO transactions and shareholder structures has intensified. The investigation may prompt stronger enforcement of disclosure requirements and could influence how similar high-growth companies structure their pre-public financing arrangements. For global investors in Korean entertainment stocks, the case underscores the importance of due diligence regarding pre-IPO share transactions and the potential risks associated with opaque ownership structures.
Sources
This report draws on Korean court filings from the Seoul Southern District Court, regulatory announcements from the Financial Supervisory Service, corporate disclosures from HYBE Corporation, and independent news reporting from Korean media outlets published between 2019 and 2024.
