South Korea’s financial watchdog has decided to refer Bang Si-hyuk, chairman and founder of K-pop powerhouse HYBE, to prosecutors over allegations that he misled investors ahead of the company’s initial public offering (IPO). This marks the most serious level of enforcement under the country’s Capital Markets Act.

According to Korean media reports and financial authorities, the Capital Market Investigation Deliberation Committee — part of the Financial Services Commission (FSC) — held a meeting on Monday, July 7, and concluded that Bang and several others should face criminal charges. The recommendation has been passed to the FSC’s Securities and Futures Commission and is scheduled for review at its upcoming meeting on July 16.

At the center of the case is a controversial series of private equity transactions made in 2019, just before HYBE — then known as Big Hit Entertainment — began its IPO process. Bang is accused of falsely assuring early investors that the company had no plans to go public, persuading them to sell their shares to a private equity fund allegedly controlled by one of his associates.

In reality, HYBE had already initiated the IPO process, including selecting a designated auditor—an early and mandatory step in a Korean public offering. Despite this, investors sold their shares based on Bang’s assurances. HYBE later debuted on the Korea Exchange in October 2020, with its IPO priced at 135,000 won per share (approximately $115 at the time). The stock price surged to as high as 420,000 won shortly after listing.

Authorities allege that Bang ultimately gained about 400 billion won (approximately $291 million) through the undisclosed deal, reportedly receiving a 30% stake in the profits from the private fund. Critics argue that the arrangement allowed him to bypass “lock-up” period rules—regulations that prevent major shareholders from selling shares shortly after an IPO.

Crucially, the transaction was never disclosed in HYBE’s official securities filings, potentially violating disclosure requirements under Korea’s Capital Markets Act. Under the law, financial crimes involving illicit gains exceeding 5 billion won (around $3.6 million) can result in a life sentence or a minimum of five years in prison.

HYBE has denied any wrongdoing, stating that “all transactions were carried out legally after careful legal review.” Bang appeared before financial regulators last month to address the allegations. The company has pledged full cooperation with both financial authorities and ongoing police investigations.

Meanwhile, the Seoul Metropolitan Police have launched a parallel investigation. On June 30, police raided the Korea Exchange offices as part of their probe into potential irregularities in HYBE’s IPO process.