HYBE, the K-pop giant behind BTS, is facing a tax probe by South Korea’s National Tax Service (NTS) as authorities look into potential violations related to the company’s 2020 initial public offering.
Multiple news outlets out of South Korea, including Korea JoongAng Daily and The Korea Herald reported on Tuesday (July 29) that tax officials visited HYBE’s Seoul headquarters the same day to gather documents and related materials.
The reports said the probe is being conducted by the NTS’s fourth investigation bureau, a unit that handles special and unannounced audits.
Earlier on Tuesday, the NTS announced a broader crackdown targeting 27 companies and individuals suspected of stock manipulation and tax evasion totaling about 1 trillion South Korean won (approx. USD$724 million).
The NTS launched the crackdown over concerns that stock manipulators are harming investors including minority shareholders.
“Due to these unfair practices in the stock market, domestic and foreign investors have turned away from the Korean stock market,” according to a translated text of the NTS’s notice.
“Due to these unfair practices in the stock market, domestic and foreign investors have turned away from the Korean stock market.”
South Korea’s National Tax Service
This marks HYBE’s first tax audit since 2022 when Seoul tax officials conducted a routine examination that resulted in the company paying “a multi-billion-won penalty,” according to the Korean media outlets.
The latest tax probe adds to mounting legal pressures facing HYBE, its founder and Chairman Bang Si-hyuk, and former employees.
Last week (July 24), the financial crime unit of the Seoul Metropolitan Police Agency raided HYBE’s headquarters as part of an ongoing probe into alleged stock manipulation by Chairman Bang, according to Korean media.
The raid followed reports by Yonhap News Agency and other local news outlets July 16 that South Korea’s Securities and Futures Commission (SFC) decided to forward a complaint against Bang and three other executives alleging violation of the Capital Markets Act.
A search warrant was issued on July 17, according to Allkpop.
According to Korea Economic Daily, regulators suspect that Bang enriched himself unjustly by misleading HYBE investors, including venture capital firms, into believing that the company’s 2020 IPO would be delayed. However, regulators said the IPO plans were proceeding swiftly as evidenced by HYBE’s hiring of an auditor.
In connection with the investigation into HYBE’s IPO, South Korean police raided Korea Exchange offices on June 30, according to Korea JoongAng Daily. There, investigators reportedly secured data related to the listing review process for the K-pop giant and collected evidence for their probe into potential capital markets law violations by Bang.
Following the latest raid on Tuesday, Allkpop reported that HYBE’s Chief Legal Officer Jung Jin Soo sent an internal email to employees urging them to stay calm: “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.”
Jung’s email, which was obtained by Allkpop, added: “We are doing everything we can to prevent this situation from causing unnecessary concern among our team. Please do not be overly worried about the investigation at the Yongsan office and continue to concentrate on your individual responsibilities.”
In a separate development last week (July 22) prior to the raid, the Seoul Southern District Court handed down suspended prison terms and fines to three individuals who previously worked for HYBE and its subsidiaries after a Seoul court found them guilty of insider trading.
The trio was found to have benefited from privileged knowledge regarding BTS’s official confirmation of their “hiatus” — due to military enlistment — in June 2022.
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