It seems that when becoming a large corporation, HYBE becomes more and more difficult to control the employees as well as manage them. Recently, 3 of the employees of HYBE Entertainment were turned over to the prosecution on charges of selling stocks using undisclosed information.
This incident is directly related to the time when BTS announced the suspension of group activities. 3 HYBE employees are currently being investigated for insider trading charges and the story behind it surprises many people.
Here is what was reported by HYBE and ḳöŕệän media on the morning of May 31, 2023 local time:
On May 31, 2023, ḳöŕệän media reported that HYBE was taking lєgαl action against 3 of the company's employees on charges of trading to reveal confidential business information. It is reported that these employees sold their shares after getting information from the company, specifically regarding BTS's future plans of activities.
According to a report by Yonhap News, Financial Supervisory Service’s Capital Market Special Judicial Police said, according to the results of the investigation under the direction of the Seoul Southern District Prosectors’ Office, three staffs, including a team leader of a department at HYBE, have been sent to the prosecution for prosecution on charges of violating the Capital Markets Act.
These three employees were suspected of insider stock trading using information related to BTS's discontinuance before the information was officially released to the general public. According to the special envoy, these three employees are in charge of idol-related work in a company under HYBE, and thanks to that, they know that BTS will start promoting solo activities in June 2022 due to m̷i̷l̷i̷t̷a̷r̷y̷ service.
Everyone is aware of the global influence of superstar BTS and when this happens, it affects not only the K-pop world, culture, and society but also the economy and politics. Not only that, BTS also accounts for more than 60% of HYBE's revenue, which means that if BTS ceases group activities, the company will face a revenue gap and a decline in trust among the stock investors.
Therefore, these employees were concerned about capital loss while holding HYBE shares in the future, so they sold the shares before the official announcement of BTS's suspension. And of course, they completely avoid this bad situation.
It is well known that, after announcing the shutdown on June 14, 2022, HYBE stock plunged 24.87% the next day. By selling shares before the news broke, these employees avoided a total loss of 230 million KRW (approximately 152,000 USD) (up to 150 million won each), at market prices on the 15th. June 2022.
However, this directly affects the value of HYBE's shares before BTS's operation plan is officially publicized. It affected the psychology of investors when they saw HYBE employees selling their shares quickly. The Financial Supervisory Service pointed out: "In this case, HYBE is being criticized for misleading investors by opaquely disclosing relevant information through social media videos instead because of public announcement or official announcement.” This made the sentence of the 3 above employees more severe.
Meanwhile, he asked HYBE to "equip a transparent public system of information related to investors in general at the right time and in the right way. It also strengthens internal controls to prevent executives and employees from using undisclosed information".
The three employees were accused of violating Article 174 of the Capital Markets Act, thanks to the disposal of their shares, after internally learning about BTS’s plans. The Financial Supervisory Service plans to thoroughly investigate and sternly respond to any actions that undermine the fair trading order of the capital market.
