Hankyung reported that according to the legal community on May 29, the Financial Crime Investigation Unit under the Seoul Capital Police Department has submitted a request to the General Investigation Unit on securities Crimes under the South Seoul District Procuracy to issue a search warrant for HYBE and related parties to the suspected fraudulent transactions of HYBE Chairman Bang Si Hyuk.
The police have been investigating since the end of last year, after allegations of transactions between Chairman Bang Si Hyuk and a private equity fund (PEF) held by a close associate.
This is the second time the police have submitted a request for a search warrant. The first time was on April 30, but the hospital denied the prosecution in early May. Afterwards, the police consolidated more evidence and filed a new search warrant.
The police said they have evidence that HYBE has continued to prepare IPOs (public listings), while still informing investors that there are no plans to list.
HYBE signed an audited contract as prescribed in November 2019 and based on that audit report to conduct IPO in October 2020. Companies preparing to list must submit an audit application as prescribed at least 3 months before the calculation date, which means HYBE submitted the application before September 2019.
However, in September and October 2019, HYBE was confirmed to have notified investors that the company had no plans to list.
At that time, investors, including Legendary Capital, received a response from HYBE's board of directors, explaining that listing would be difficult due to unfavorable market conditions.
It is reported that the police have collected statements related to this matter.
Some investors who received feedback from HYBE have sold their stocks. Private equity funds such as Easton Equity Partners and Newmain Equity were established in June and November 2019 to buy back shares from HYBE investors.
A capital market lawyer said: The submission of an audit application as prescribed clearly shows the intention to conduct IPOs from the company and major shareholders. If at that time, the company told investors that it had no intention of listing, it would be difficult to avoid suspecting that they had deliberately deceived the investor.
Previously, on May 28, Korean media reported that the Financial Supervisory Committee (FSS) expected to transfer the case to the prosecution agency for consideration of criminal proceedings against Chairman Bang Si Hyuk on charges of fraudulent transactions.
FSS has collected evidence that in 2019, Bang Si Hyuk lied to investors that HYBE (then Big Hit) had no plans to list, in order to promote them to sell shares to a private investment fund established by his acquaintances.
In addition, Bang Si Hyuk was accused of signing a contract with the fund to share 30% of investment profits and earn about 400 billion won. However, the agreements were not clearly stated in the securities disclosure documents when listed.
According to Article 443 of the Capital Market Law, if the proceeds from the violation exceed 5 billion won, Bang Si Hyuk can be sentenced to life in prison or imprisonment of 5 years or more.
