The legal and PR woes of K-pop powerhouse HYBE continue to build, with South Korea’s National Tax Service now launching an investigation into tax affairs around the company’s initial public offering in 2020. That’s separate to the investigation into allegations HYBE founder Bang Si-hyuk fraudulently misled investors ahead of the same IPO.
It means that staff at HYBE’s offices in Seoul’s Yongsan district had to deal with a visit from some tax inspectors earlier today, just days after a raid by officers involved in the fraud investigation.
Given that last week three former HYBE execs were also fined over insider trading and the big old Ador v NewJeans legal battle was back in court, I think it’s fair to say it’s been a distracting month for the K-pop company’s employees.
So much so, HYBE’s Chief Legal Officer Jung Jin Soo has sent a memo to staff urging them not to get too distracted, though that was before the tax investigation was announced and mainly related to last week’s raid over the Bang fraud allegations.
According to AllKPop, the memo said, “The company is actively cooperating with the authorities to clarify the facts. We will provide a thorough explanation to demonstrate that all matters were handled in compliance with laws and regulations”.
“We are doing everything we can to prevent this situation from causing unnecessary concern among our team”, the legal chief added. “Please do not be overly worried about the investigation at the Yongsan office and continue to concentrate on your individual responsibilities”.
If you too would like to be distracted by all the recent HYBE dramas, here’s a quick summary…
- Bang is accused of misleading investors about the HYBE IPO, telling them in 2019 that no IPO was planned even though the process for a stock market listing was already underway. That allegedly resulted in some investors selling their shares to an equity fund that had connections to Bang. The case was recently passed to prosecutors, before last week’s raid on HYBE HQ.
- According to Korea JoongAng Daily, HYBE is “under investigation by the National Tax Service as part of a sweeping probe into alleged stock manipulation and illicit transactions during corporate listings”. It’s thought NTS is investigating if any taxes were evaded during the HYBE IPO process.
- Three former employees of various HYBE companies were last week fined and handed suspended prison sentences for violating South Korean insider trading rules. It was alleged that they used privileged information to sell their HYBE shares ahead of the announcement in 2022 that the company’s biggest act BTS were going on hiatus in order to complete military service, an announcement that caused the HYBE share price to tank.
- HYBE subsidiary Ador is trying to enforce its contract with NewJeans, who quit the label last year. Last week lawyers in court said that the Ador the group signed with no longer exists after the sacking, by HYBE, of the label’s founder and CEO Min Hee-jin. A statement from the group’s members added, “telling us to return to Ador and HYBE is like telling the victim of school bullying to return to the same school and endure it”. The dispute will now move to mediation and return to court in October if that process fails.