K-pop mogul Bang Si-hyuk, the man who created supergroup BTS, could be arrested on charges of fraudulent trading before his $7.3 billion company went public.
South Korean police have asked prosecutors to request a court warrant over accusations that he misled investors in 2019, by claiming a public listing for his conglomerate Hybe was not likely, while secretly preparing for it.
Hybe debuted on South Korea's Kospi bourse in October 2020, and police allege Bang pocketed some 200 billion won ($136 million; £101 million) as a result. He denies the allegations.
The case against Bang is long-running and has seen raids at Hybe's headquarters, some of his assets frozen, and calls for him to step down as company chairman.
The 53-year-old has maintained that his actions were above board. He has been banned from traveling abroad since August while the investigation is carried out.
The request for a warrant comes weeks after BTS - Hybe's crown jewel and the reason for its immense success - kicked off a comeback world tour following a hiatus of nearly four years.
Industry watchers estimate that Hybe stands to make more than $1 billion from the sold-out tour, which will take the group to 34 cities across the world.
The company's shares hit a four-year high when BTS announced their world tour in January, adding over 1 trillion won to its market value.
Bang, who was instrumental in taking the group global, said in a recent interview with Billboard that BTS had become like a 'tourist attraction... widely recognised and embraced by the global public.'
Under South Korean law, those convicted of making 5 billion won or more in illicit proceeds face between five years in jail and a life sentence.
New layers to Bang's situation emerged when South Korea's financial regulator launched an investigation into allegations that he entered into profit-sharing agreements with private equity funds ahead of Hybe's market debut, without proper public disclosure.
Police allege that Bang had deceived existing investors and venture capital firms into thinking that there were no plans for a public listing, inducing them instead to sell their Hybe shares to a private equity fund he is alleged to have ties to.
Bang is suspected of then getting a 30% cut of the illicit proceeds, amounting to 200 billion won, when the private equity fund sold its stake after Hybe went public.
Hybe has denied wrongdoing, arguing that it provided a copy of the agreement in question to the underwriters for its initial public offering who advised that disclosure was not necessary.
Bang's lawyers expressed regret over the police's request for an arrest warrant and stated they would continue to cooperate with legal procedures while explaining their position.
Hybe shares fell 2.3% at the closing bell on Tuesday while the benchmark Kospi rose 2.7%. Other K-pop conglomerate stocks also fell.
As South Korean authorities vowed to crack down on stock manipulation, the case underscores growing scrutiny in a country grappling with financial irregularities at high corporate levels.
