‘father of BTS’ Bang Si-hyuk: will he be taken into custody?···One year and four months of police investigation, and the prosecution·court judgment - 경향신문

This article was translated by an AI tool. Feedback Here.

Bang Si-hyuk, HYBE chairman, appears at the Seoul Metropolitan Police Agency Financial Crime Investigation Unit in Mapo-gu, Seoul, on September 15 last year to be questioned over alleged violations of the Capital Markets Act (fraudulent unfair trading). Kwon Do-hyeon

HYBE Chairman Bang Si-hyuk, known as the father of BTS, now stands at a crossroads over possible detention. With police applying for a detention warrant for him, attention is focusing on how his custody will be handled.

The investigation into Bang is being conducted by the Seoul Metropolitan Police Agency Financial Crime Investigation Unit. On the 21st, police applied to the Seoul Southern District Prosecutors Office for a detention warrant on suspicion of violating the Capital Markets Act (fraudulent unfair trading). It comes one year and four months after the investigation began.

Bang Si-hyuk, HYBE chairman, delivers a keynote speech at the Kwanhun Forum hosted by the Kwanhun Club at the International Conference Hall of the Korea Press Center in Jung-gu, Seoul, on March 5, 2023. Seo Sung-il, senior staff reporter

Prosecutors suspect that in 2019, before HYBE went public, Bang obtained unjust gains worth about 190 billion won by telling existing institutional investors during the process of buying their shares that the listing plan would be delayed or might not happen. Early investors such as AlpenRoute Asset Management and LB Investment sold their holdings in Big Hit Entertainment, then an unlisted company, to a specific private equity fund (PEF). Not long after, Big Hit went public, and the share price surged on the back of BTS’s global popularity. In November 2021, when BTS held concerts in Los Angeles, HYBE shares rose to around 420,000 won per share. Had they known of the listing plan in advance, they would not have sold.

Police determined that the decision to sell stakes before the listing was not a mere error in judgment. They say Bang misled early investors by saying “no plan to go public for the time being,” inducing them to sell. Police are investigating indications that, in the process, a private equity fund set up by a close associate of Bang entered into a prior non-disclosed agreement to take 30% of the post-listing capital gains.

Police put the illicit gains taken in this way by Bang and associates at around 190 billion won. Including related executives, the total comes to 260 billion won. It is an unprecedented capital-market unfair-trading case, with unjust profits at the highest level among cases initiated ex officio by police.

Bang Si-hyuk, HYBE chairman accused of deceiving investors to make them sell their stakes ahead of the initial public offering (IPO), answers questions from reporters as he appears as a suspect at the Seoul Metropolitan Police Agency Financial Crime Investigation Unit in Mapo-gu, Seoul, on September 15 last year. Yonhap News Agency

His side categorically denies the allegations. They state that at the time of the October 2020 listing they complied with relevant laws and were prioritizing overseas investment attraction.

As police investigating allegations of fraudulent unfair trading by HYBE Chairman Bang Si-hyuk conduct searches and seizures at HYBE headquarters and other locations, a view of HYBE headquarters in Yongsan-gu, Seoul, on July 24 last year. Yonhap News Agency

This case is drawing more attention than usual because of the longstanding friction and relationships among investigative bodies such as the prosecution and the police.

Unlike the prosecution, which is soon to remove its ‘signboard’, the police, now set to stand as a singular specialized investigative body, may find that this corporate investigation is both an opportunity and a risk to demonstrate investigative capacity. Because it is a major financial case the police initiated on their own and it directly targets alleged wrongdoing by Bang, a figure viewed as a standard-bearer of the global K-pop industry, the organization may even feel its fate is on the line.

Special judicial police at the Financial Supervisory Service have also ‘entered the fray’, examining the same case separately.

With the police having applied for a warrant for Bang, attention now turns to the prosecution. If the prosecution files with the court the warrant requested by police, the court will hold a pre-arrest suspect examination (substantive warrant review). Bang would then stand at the threshold of detention.

In and around the legal community, many expect that, given the nature of fraudulent unfair trading, in which the key issues are whether investors were deceived and whether intent can be proven, the prosecution is likely to seek a warrant if it determines the elements of the crime have been sufficiently substantiated. In that event, it is expected to emphasize the ‘gravity of the matter’ in light of the case scale and its impact on the capital market.

However, even if the prosecution seeks a warrant, it remains uncertain whether the court will grant it.

The court determines detention by comprehensively weighing the seriousness of the offense, the possibility of evidence destruction, and the risk of flight. Many in legal circles assess that Bang poses little flight risk. The fact that he has resided in the country and responded to summonses during the investigation is also likely to influence how the court views the case.

However, the possibility of evidence destruction is cited as a point of contention. Before appearing for his first police questioning last September, Bang is said to have replaced both mobile phones he had been using. The company also changed its in-house messenger around the time of the listing, reportedly making it difficult for police to secure related materials.

Kim Joong-dong, former HYBE chief investment officer (CIO) identified as a key figure, has also departed overseas. Serving as an outside director from 2011 to 2019, he was involved in attracting early investors and is regarded as well acquainted with pre- and post-listing equity transactions. He left for the United States in June last year, and an Interpol notice has reportedly been issued.

The court decision on Bang may prove to be a watershed that goes beyond the custody issue of a single corporate head, potentially affecting order in the domestic capital market and the broader investigative system.

HYBE headquarters in Yongsan-gu, Seoul (left), and HYBE Chairman Bang Si-hyuk. Kyunghyang Shinmun file photo