South Korean police have moved to detain Bang Si-hyuk, the founder of K-pop giant Hybe – the entertainment company behind groups including BTS – in a case that has spilled beyond finance and into the politics of Seoul’s uneasy alliance with Washington.
The Seoul Metropolitan Police Agency said it had requested an arrest warrant for Bang through the Seoul Southern District Prosecutors’ Office, citing alleged fraudulent stock trading in violation of the Capital Markets Act.
The case took on a diplomatic edge after the US embassy in Seoul reportedly asked South Korean authorities to allow Bang to travel to the US while he remained under investigation.
For the past 16 months, police have been looking into claims that in 2019, Bang misled investors into selling their Hybe shares to a private equity fund allegedly linked to him, ahead of the company’s initial public offering.
The original shareholders were allegedly not informed of the IPO plan, which materialised about a year later, potentially depriving them of the opportunity to sell their shares at higher prices.
After Hybe’s shares surged following the IPO, the private equity fund reportedly made substantial profits and allocated roughly 200 billion won (US$136 million) to Bang under an undisclosed earn-out agreement.
Bang has denied the allegations, stating that he complied with all relevant laws and regulations at the time.
“It is regrettable that an arrest warrant was requested despite our long-term, sincere cooperation with the investigation,” his defence lawyer said in a statement. “We will faithfully participate in future legal proceedings and do our best to explain the situation.”
In South Korea, police must seek arrest warrants through prosecutors, who then decide whether to forward the request to a court. If prosecutors proceed, a pre-detention hearing is typically held within two to three days, after which the court determines whether to detain the suspect.
South Korea’s Capital Markets Act prohibits fraudulent trading, including gaining unjust profits through false statements or omission of material information in financial transactions.
If illicit gains exceed 5 billion won, the offence is considered serious and is punishable by life imprisonment or a minimum of five years in prison.
“It would be highly contestable whether Bang had a clear intent to conceal the IPO plan and deceive original shareholders,” a lawyer told This Week in Asia on condition of anonymity because of the sensitivity of the subject. “It may be difficult to find material evidence proving deliberate intent.”
Another key issue was “whether the earn-out agreement between Bang and the private equity fund constitutes illegal profit-sharing in violation of the law”, the lawyer added.
Hybe Corporation, founded by Bang in 2005, is a leading South Korean multinational entertainment company.
Formerly known as Big Hit Entertainment, it operates as a diversified entertainment and lifestyle platform specialising in music production and talent management.
Its roster includes major K-pop acts such as BTS, Seventeen, NewJeans and TXT.
‘Inappropriate’ move?
The police move came shortly after Reuters reported that the US embassy in Seoul had sent a letter to South Korea’s National Police Agency requesting that Bang be allowed to travel to the US for an Independence Day event and BTS-related meetings.
Kim Joon-hyung, a lawmaker from the progressive Rebuilding Korea Party, criticised the request as an “inappropriate” diplomatic misstep that could infringe on South Korea’s sovereignty.
“It is noteworthy that this request comes at a time when the United States may be testing how cooperative the Lee Jae Myung government is with Washington’s policies,” Kim told This Week in Asia.
The embassy letter lands amid broader signs of strain between the two allies.
US Forces Korea (USFK) has reportedly reduced intelligence sharing with South Korea after Unification Minister Chung Dong-young publicly mentioned a suspected third North Korean uranium enrichment site in Kusong last month.
Until now, only Yongbyon and Kangson have been officially recognised as uranium enrichment sites in North Korea.
Chung argued that Kusong had already been referenced in media reports and public sources, including a 2016 report by the US-based Institute for Science and International Security.
The conservative opposition People Power Party has called for Chung’s resignation, accusing him of leaking sensitive information.
President Lee defended Chung, writing on social media that the Kusong facility was already widely known and that “any claim that he leaked classified US information is unfounded”.
Tensions were also stoked in February when a US Air Force exercise over the Yellow Sea led to a rare stand-off with Chinese fighter jets, blindsiding Seoul, which had not been given prior notice.
USFK commander General Xavier Brunson expressed regret to South Korean Defence Minister Ahn Gyu-back after a complaint was made, according to Yonhap News Agency.