As the Financial Supervisory Service warned that it would refer HYBE Chairman Bang Si-hyuk to prosecutors for 'fraudulent trading allegations,' it was revealed that prosecutors conducted a search and seizure on a former HYBE employee for 'insider trading,' raising concerns about issues in HYBE's internal control system.

On April 23, 2022, citizens pass by the HYBE headquarters in Yongsan-gu, Seoul. /Courtesy of News1

On the 30th, according to the entertainment industry, the FSS secured evidence that Bang, the founder of HYBE, deceived existing shareholders by claiming there were no plans for an initial public offering (IPO) during HYBE's listing process in 2019, prompting them to sell their equity to a private equity fund established by Bang's acquaintance. In the process of promoting the IPO, false information was leaked to shareholders to sell their stocks, which were then sold to the private equity fund, resulting in investment profits estimated at about 400 billion won.

On the same allegations, the Seoul Metropolitan Police Agency's Financial Crime Investigation Unit applied for a search warrant for HYBE at the Southern District Prosecutors' Office the day before.

As soon as Chairman Bang became the subject of the FSS's investigation, on the 29th, prosecutors began an investigation into a HYBE employee, identified as A, for 'insider trading.' Employee A is suspected of having obtained advance information in January 2021 that HYBE would invest in YG PLUS and purchasing YG PLUS stock for 240 million won.

In 2022, employees of HYBE's affiliates were also indicted without detention for 'violating capital markets law' after using 'insider information' to avoid losses. It is known that they avoided about 200 million won in losses by selling their HYBE stocks after learning in advance about the group's suspension of activities of BTS members.

As issues related to insider trading persist, concerns among HYBE investors are growing. The owner risk associated with Chairman Bang, along with the search on employees, has led to worries that multiple adverse factors could lead to a drop in stock prices. In fact, HYBE's stock was trading at 289,500 won on the 26th, and within four days of the adverse news breaking, it fell about 8.5% to the low 260,000 won range.

Bang Si-hyuk is the chairman of the HYBE board. /Courtesy of News1

In 2022, HYBE stated that it prohibits members handling undisclosed important information from conducting stock trading to prevent insider trading. It also explained that this is codified in company regulations, and members are provided guidance to familiarize themselves with these rules.

Experts pointed out that if issues related to insider trading persist despite HYBE's own efforts, questions would be raised about their effectiveness.

Kwon Do-jung, a lawyer at Jeongryul Law Firm, noted, 'The entertainment industry is structured around artists, so even general employees can easily access sensitive important information. Therefore, internal control standards need to be heightened to prevent the pursuit of personal gain through the use of insider information.'

He added, 'Considering that employees from general staff to executives at HYBE appear to be exploiting undisclosed information for economic gain, it seems there is not enough awareness about this internal issue. If such incidents continue to occur, the market's trust in HYBE could be damaged.'

A business professor, who requested anonymity, stated, 'The company should provide regular training regarding internal stock trading, but given that the same problems keep recurring, we need to examine how effectively this training has been implemented.'