Employees at BTS Label HYBE Face Insider Trading Charges Linked to Group’s Hiatus Announcement

Three HYBE employees could be prosecuted for insider trading in South Korea for allegedly using non-public information about K-pop group BTS’ planned hiatus before the news was given to investors, according to multiple reports out of South Korea.  

South Korea’s Financial Supervisory Service (FSS), the equivalent of the Securities Exchange Commission in the U.S., says the employees allegedly sold HYBE shares after learning that BTS would go on hiatus but before the group announced its plans to the public on June 14, 2022. HYBE’s share price plummeted 28.9% the following day, erasing about $1.59 billion of market capitalization, and didn’t reach the pre-announcement level until Jan. 27. The employees made an estimated 230 million KRW ($173,000) through the trades, according to reports.  

The FSS says that the Seoul Southern District Prosecutor’s Office was conducting the investigation and that the HYBE insiders could face criminal prosecution, online outlet allkpop reported.   

Korean media reports say the unnamed employees were in charge of managing HYBE’s music groups and one was a team leader. “HYBE is unable to comment on this matter as this involves an ongoing investigation on an individual,” the company said in a statement to Billboard. 

BTS announced it was taking a break from group activities after nine years in an hour-long, pre-recorded YouTube video, which showed the seven members gathered at a dining table and discussing their careers. The share price’s decline led to speculation that word of the pending announcement had leaked and allowed some investors to sell shares before the precipitous drop. HYBE’s share price dropped 13.6% in the two trading days leading up to the June 14 announcement. 

The FSS noted that HYBE heightened investor confusion by disclosing information about the BTS hiatus through social media videos, rather than through official company announcements, allkpop reported. 

The Korean regulator also made news recently after it raided the Seoul office of SM Entertainment on April 17. According to reports, the regulator was seeking evidence of stock price manipulation after HYBE, which took a stake in the company in February and March, filed a petition seeking a probe.