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The Korea Economic Daily recently disclosed that Bang Si Hyuk’s purported secret agreements linked to HYBE’s IPO triggered a fraud investigation.
How did Bang Si Hyuk, who initially regarded the issue as a mere “Mishap,” become entangled in a fraudulent trading scandal?
In late November 2024, media outlet Market Insight revealed an “interest-sharing agreement” involving HYBE chairman Bang Si Hyuk and a private equity fund (PEF) run by his close associates. Shortly thereafter, both HYBE and the individuals implicated—including Kim Jung Dong, Yang Joon Seok, and Kim Chang Hee—began preparing for an anticipated high-level investigation by South Korea’s Financial Supervisory Service (FSS).
Despite internal disagreements regarding the division of 200 billion KRW (approximately 145 million USD) in profits from their HYBE investment, the PEF insiders began retracing their actions. They scrutinized emails, call recordings, and transaction timelines, reaching out to LB Investment staff who had previously divested their shares in the company.
At first, they believed the situation had settled when the FSS’s Investigation Department 3 halted operations. However, the case was discreetly transferred to Department 2, which intensified evidence collection related to the contentious stock trades. The police also narrowed their focus, with prosecutors expected to initiate a thorough inquiry soon.
“No IPO Plans,” Despite Formal Audit Request
According to sources in the financial investment sector, on June 5, both the FSS and the police viewed the fact that HYBE (then known as Big Hit) had applied for a designated audit—a precursor to an IPO—prior to September 2019 as critical evidence in the fraud investigation. This contradicts Bang Si Hyuk’s claims of no IPO intentions at that time.
Although Bang Si Hyuk mentioned a potential IPO publicly in 2017, no action was taken until the company sought a designated auditor in 2019, a vital step in the IPO process. In Korea, firms need to submit applications for designated auditors by September of that year to qualify for IPO reviews by the Korea Exchange. HYBE entered into a contract with Hanyoung Accounting Corporation in November 2019, after being assigned Hanyoung and Ichon as prospective auditors.
Simultaneously, between September and October 2019, HYBE allegedly informed its investors of no immediate plans for an IPO. Management addressed IPO inquiries from shareholders by citing poor market conditions.
Critics argue that HYBE would not have spent hundreds of millions of KRW on a formal audit without plans for public listing. The cost of the 2019 audit alone reached 350 million KRW (258,223 USD), in contrast to earlier years, which only incurred costs of 30–40 million KRW (22,134–29,511 USD) without audits. HYBE proceeded quickly with its IPO post-audit and went public in October 2020.
The key issue: existing investors who believed there would be no IPO sold their shares, largely to PEFs tied to Bang Si Hyuk, out of fear of their funds being locked. Bang reportedly signed a clandestine agreement with the PEF to share 30% of profits from this transaction.
Authorities are said to have strong additional evidence indicating that HYBE and Bang Si Hyuk were, in fact, pursuing an IPO during this timeframe, including stock options granted to key executives, which has now emerged as a new focal point.
Did Key Executives Know the Real IPO Timeline?
In November 2016, HYBE granted stock options to five early key executives:
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Vice President Choi Yoo Jung (160,000 shares)
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Producer Pdogg (Kang Hyo Won, 128,000 shares)
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Former HYBE America CEO Yoon Seok Joon (120,000 shares)
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Head of Management Kim Shin Gyu (88,000 shares)
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Former Comms Director Chae Eun (56,000 shares)
These stock options became exercisable from January 1, 2019, at a per-share exercise price of 1,063 KRW (~0.78 USD).
This period coincided with BTS’s ascendance to global stardom, highlighted by their second full-length album release in October 2016, marking a significant milestone. As the company expanded rapidly, tensions heightened around stock distribution and financial incentives. When LB Investment and Korea Investment & Securities sold HYBE shares to Stick Investment at approximately 30,000 KRW (~22.13 USD) per share in October 2018, executives like Choi reportedly grew increasingly uneasy.
Bang Si Hyuk is said to have leveraged this unrest to adjust the shareholder base. Choi, who had expressed intentions to leave, was encouraged to divest her shares to Eastone PE. The shares sold for prices ranging from 32,000 KRW to 40,273 KRW (approximately 23.61 to 29.71 USD) per share. Bang allegedly never disclosed any IPO plans to Choi. In a phone interview, Choi affirmed, “There was no mention of an IPO at all.”
Meanwhile, Chae Eun’s stock options were revoked because Chae resigned prior to fulfilling the mandatory employment term. Chae has since filed a lawsuit against HYBE, asserting the company forced her exit.
While this diminished potential share dilution, HYBE needed to retain its most critical asset: producer Pdogg, who co-wrote BTS hits such as “Spring Day,” “DNA,” “Boy With Luv,” and “ON.” Industry insiders often contend that while BTS could persist without Bang Si Hyuk, they could not thrive without Pdogg. He retained his stock options through HYBE’s IPO and cashed in during the first half of 2021 for a profit of 39.9 billion KRW (around 30 million USD). His reported 2021 salary was 38 million KRW (approximately 28,036 USD) with bonuses totaling 111 million KRW (81,894 USD), emphasizing the stock options as his primary compensation.
Some speculate that while Choi was kept in the dark, other top executives were discreetly informed about the IPO timeline to calm their concerns. If investigators discover any verbal confirmations or documents regarding this, it could provide critical evidence beyond the 2019 audit.
“We’ll Get 1 Trillion KRW from SoftBank Instead of Going Public”
To reassure initial investors, Bang Si Hyuk and HYBE executives reportedly persistently denied any IPO intentions, even mentioning SoftBank’s Vision Fund as an alternative source of investment. In committee meetings held around September–October 2019, executives allegedly asserted they would pursue a 1 trillion KRW (735 million USD) investment from the Vision Fund to postpone the IPO and prevent undervaluing the company. Bang purportedly claimed that he refused to publicly list HYBE at a market valuation below 5 trillion KRW (3.675 billion USD).
An AlpenRoute executive, who sold HYBE shares to Eastone PE, recalled, “HYBE executives consistently conveyed there were no IPO plans,” even introducing Eastone PE as a long-term investor.
However, behind the scenes, Eastone PE and another PEF, NewMain Equity, both linked to Bang, were allegedly busy fund-raising to acquire investor shares. Yang Joon Seok, a former securities broker, founded Eastone PE in April 2019 and secured 25 billion KRW (18.5 million USD) from Hoban Construction to purchase Choi’s shares. By November, former HYBE outside director Kim Jung Dong joined the initiative, expanding operations. Eastone PE and NewMain Equity collaborated to acquire an additional 105 billion KRW (77 million USD) in shares from initial investors, agreeing to split 30% of the profits with Bang Si Hyuk.
Ultimately, HYBE went public as scheduled, and the trio secured a performance-based payout of roughly 200 billion KRW (148 million USD). Kim received about half (100 billion KRW), while Yang and Kim Chang Hee garnered around 50 billion KRW each (37 million USD). Although internal disputes arose over the distribution of shares, nobody challenged Kim Jung Dong’s entitlement, given his direct association with Bang. Yang and Kim reportedly had disagreements over the remaining shares.
In the end, the biggest beneficiary appears to be Bang Si Hyuk, who is estimated to have amassed around 400 billion KRW (approximately 290 million USD), including about 200 billion KRW from Eastone PE.
SEE ALSO: Bang Si Hyuk’s 0 million insider trading investigation sparks renewed interest in the meager shares handed to the BTS members during HYBE’s IPO
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