The financial authorities are planning to file a criminal complaint against HYBE Chairman Bang Si-hyuk with the prosecution next week on charges of fraudulent unfair trading under the Capital Markets Act.
According to the financial authorities and the financial investment industry on July 9, the Capital Market Investigation and Deliberation Committee (CMIDC), a deliberative body under the Securities and Futures Commission (SFC) of the Financial Services Commission, held a meeting last week and made this decision, passing its opinion to the SFC.
The SFC is scheduled to hold a regular meeting on July 16 to table and deliberate on the agenda related to Chairman Bang. An official from the financial authorities stated, "There is an aspect in which Chairman Bang directly violated the Capital Markets Act," and predicted that it would be difficult for the CMIDC's decision to be overturned.
Previously, the Financial Supervisory Service secured evidence that Chairman Bang, during HYBE's past listing process, deceived shareholders by claiming there were no plans for an initial public offering (IPO) while actually pursuing the company's listing, and conducted an investigation on charges of fraudulent unfair trading under the Capital Markets Act.
According to the industry, prior to HYBE's listing in 2020, Chairman Bang signed a contract to share 30% of the capital gains from the sale of shares with a private equity fund (PEF) established by an acquaintance. These PEFs purchased HYBE shares from existing investors, including institutional investors and venture capital (VC) firms. It is reported that the amount Chairman Bang received after the listing was approximately 400 billion KRW.
However, this contract was omitted both during the Korea Exchange's listing review and the submission of the securities registration statement to the Financial Supervisory Service. As a result, there have been claims that early investors who purchased HYBE shares without knowledge of this contract suffered losses. The financial authorities believe that Chairman Bang mobilized private equity funds to circumvent the lock-up period (a restriction that prevents major shareholders or executives from selling shares for a certain period after listing).
The current Capital Markets Act stipulates that if the gains obtained or losses avoided through illegal acts exceed 5 billion KRW, the offender is subject to life imprisonment or a minimum of five years in prison.
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