Police have submitted Bang Si-hyuk, chairman of HYBE, to prosecutors without detention on allegations of obtaining illicit gains of approximately 260 billion won during the company's initial public offering (IPO) process. There are concerns that prosecutors may request further investigation due to unresolved disagreements between law enforcement and prosecutors regarding the applicability of fraudulent trading under the Capital Markets Act.
According to legal sources on September 3, the financial crime investigation unit of the Seoul Metropolitan Police Agency submitted Bang and four others to the Southern District Prosecutors' Office for violations of the Capital Markets Act.
Bang and his associates are accused of misleading existing shareholders in 2019 by claiming there were no plans for an IPO, which led them to sell their shares to a specific private equity fund. They allegedly profited from selling the shares after HYBE went public.
The police found that Bang directed the review of an IPO as a funding method in April 2019 and established a listing preparation team in July of the same year. However, Bang's side reportedly misled existing shareholders between August and October of that year, advising them to sell their shares under the pretense of no IPO plans.
Private equity fund representatives informed investors about HYBE's IPO plans and expected returns between October and November of the same year, subsequently acquiring shares from existing shareholders through a special purpose company (SPC). HYBE was listed on the securities market in October 2020, and the private equity fund sold all its shares in two transactions.
The police estimated the total illicit gains at 263.1 billion won, and the court accepted a pre-indictment asset preservation request for the entire amount. Bang is believed to have obtained around 150 billion won of the total illicit gains.
Law enforcement and prosecutors have shown differing views on whether Bang's actions constituted a crime that undermined the order of the capital market. The police view the concealment of listing information, the acquisition of existing shares, and the subsequent sale of shares and profit distribution as part of a planned crime, arguing that it infringes on the 'social legal interests' by exploiting insider information for profit, thus harming the fairness and trust of the capital market.
Conversely, prosecutors reportedly believe that deceiving existing shareholders to acquire shares is more aligned with infringing on individual investors' 'personal legal interests' rather than social legal interests.
The police applied for an arrest warrant for Bang on April 21, but prosecutors rejected it, citing insufficient justification for the necessity of arrest and social legal interest infringement. A second warrant application on April 30 was also rejected, as prosecutors stated that prior supplementary requests had not been adequately addressed.
Following this, the police reviewed domestic and international precedents and gathered opinions from academia and financial authorities but maintained their original assessment. Unable to reconcile differences with prosecutors and without new grounds for a third warrant application, they submitted the case.
Given that the legal issues pointed out by prosecutors during the two warrant rejections remain unresolved, it is anticipated that immediate prosecution may be challenging. Prosecutors may review the investigation records and request supplementary investigations from the police or conduct their own.
A lawyer, a former chief prosecutor, stated, "If prosecutors proceed with charges without resolving the issues they identified as needing further investigation, it could burden the proof of the allegations."
Bang's legal team expressed, "We have consistently provided objective materials and evidence regarding the allegations, and we expect that the upcoming procedures will transparently resolve the suspicions."
* This article has been translated by AI.
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