HYBE Faces "Largest Crisis in Its History" as Chairman Bang Si-hyuk Approaches Police Interrogation

HYBE is currently confronting the greatest risk it has encountered since its establishment. Chairman Bang Si-hyuk of HYBE has been charged with fraudulent securities trading during the company’s initial public offering process, and both the police and prosecutors are conducting investigations simultaneously, with his first police interrogation scheduled for the 15th. The Securities and Futures Commission, under the Financial Services Commission, filed charges against Chairman Bang Si-hyuk and former executives with the prosecutors on July 16 last year, accusing them of violating laws prohibiting fraudulent trading in capital markets. The commission believes that despite HYBE being in the midst of IPO preparations in 2019, Chairman Bang deceived existing investors by implying that the listing would be delayed. It also alleges that he forced a special purpose company established by a private equity fund involved with HYBE executives to purchase shares. The police have been investigating related matters since late last year and recently conducted searches at the Korea Exchange and HYBE’s headquarters. The timing of this controversy raises even greater concerns about its impact on the K-pop industry, as it comes at a critical period when a former BTS member has completed his military service in June and is set to make a full group comeback and embark on a world tour next spring. The fact that Chairman Bang Si-hyuk, who serves as BTS’s producer and HYBE’s largest shareholder, must now deal with legal challenges ahead of formal interrogations is likely to severely restrict the company’s ability to carry out creative activities and expand globally in the K-pop industry. In July, when the controversy intensified, HYBE issued an official statement saying, “Regarding the current allegations, we are actively cooperating with financial authorities and the police to clarify the facts,” and added that it would thoroughly explain that the listing process was conducted in compliance with laws and regulations. Chairman Bang Si-hyuk also expressed his views in an email sent to employees in early August, stating, “Since I started this endeavor with a grand dream of advancing the music industry and a strong sense of responsibility, I tried my best to ensure I could stand by my actions,” and admitted humbly, “Sometimes that determination might have been perceived as arrogance.” He further added, “I will sincerely address the situation during the listing by cooperating fully with the financial authorities’ investigations.” Currently, opinions regarding HYBE’s IPO process are divided. Government authorities believe that Chairman Bang and former executives deceived existing shareholders and obtained improper gains through private equity funds and similar means. On the other hand, the investment banking industry points out that institutional investors holding Big Hit Entertainment stocks at the time requested to sell their shares due to fund maturities and adjustments in their investment portfolios. Since BTS was the only major artist under Big Hit Entertainment at that time and all its members were about to serve in the military, this was explained as part of a risk-avoidance strategy. Some experts in the music industry fear that this incident will cast a shadow over K-pop’s global revenue generation. They predict that if owner-related risks persist for an extended period, artists’ activities, content production, and overseas operations could all be hindered. However, there are also opinions suggesting that to address structural issues such as enhancing the global competitiveness and credibility of the K-pop industry, HYBE should take responsible action now to strengthen corporate compliance management.