Hybe raid

The Korean National Police Agency in Seoul. Photo Credit: Gohsuke Takama

Three former Hybe employees have received suspended prison sentences on insider-trading charges. Meanwhile, police reportedly raided Hybe’s headquarters today amid a separate fraudulent-trading investigation involving founder Bang Si-hyuk.

These and other developments just recently came to light in regional reports. Diving into the insider-trading sentences, one of the accused was formerly with the K-pop giant’s Source Music subsidiary. The second individual worked for Hybe’s Belift Lab, and the third was part of Big Hit Music, per the Korea JoongAng Daily.

As described by the same outlet, the trio learned of BTS’ hiatus – which largely coincided with mandatory military enlistments – before its public announcement. Despite members’ strong solo followings, the potential for a BTS comeback, and the reach of Hybe’s other artists, the three apparently felt compelled to capitalize on the knowledge.

In scrambling to sell pre-hiatus, they missed a total of approximately $168,000 in losses – shares fell about 25% immediately after the split’s disclosure and continued to dip for a while after the fact – the report shows. Now, though, the culprits are on the hook for a lot more than that.

Specifically, the ex-Source employee has been slapped with a 10-month sentence, suspended for two years, and a fine roughly equaling the aforesaid losses. Those previously with Big Hit and Belift Lab received six-month sentences, likewise suspended for two years, besides $85,000 in penalties between them.

Not stopping there, the court also ordered the three to cough up an amount equal to the losses they avoided by selling early. Adding insult to injury, “avoided” doesn’t tell the full story here. Hybe shares went on to rebound not years later but in mid-2023, peaking at nearly triple their October 2022 low.

Shifting to the fraudulent-trading allegations against Hybe founder Bang Si-hyuk, last time we checked in, the company formally responded to the claims and the investigations.

Regarding the plural: there are technically two ongoing probes, one carried out by Seoul police, the other by South Korea’s competition watchdog.

Both inquiries center on private-equity side deals that Bang, who was recently referred to prosecutors, allegedly cashed in on ahead of his company’s IPO. Long story short – we’ve explored the subject in detail – the exec allegedly misled existing shareholders and circumvented a lock-up period en route to scoring close to $300 million in ill-gotten gains.

Now, new evidence yet suggests that the situation is intensifying. According to the Korea Herald, police today raided Hybe’s Seoul headquarters in connection with the allegations; authorities had already raided the Korea Exchange offices.

Additional details are few and far between at present, but suffice to say that the development is less than ideal for Bang as well as his business. Hybe shares (KRX: 352820) slipped by 2% during today’s trading to finish at $191/ ₩262,000 apiece.

Also less than ideal for Hybe: The marathon contract dispute between its Ador subsidiary and NewJeans.

As many know, the girl group maintains that Ador violated the terms of their agreement, which is allegedly null and void. The Hybe division, for its part, is denying as much, says the deal remains in effect, and still wants NewJeans members to mount a comeback under the company banner.

Based on the available evidence, that appears an unlikely near-term outcome. As recounted by the Herald once again, the legal battle today had another hearing; the courtroom outing seems to have delivered little progress towards a resolution.

However, there has been some movement in the ugly showdown. Police last week reportedly cleared former Ador CEO Min Hee-jin of criminal breach of trust allegations levied by Hybe in 2024. The company is reportedly preparing to appeal.