SEOUL (Reuters) - A South Korean music executive credited with creating popular K-pop group NewJeans denied allegations that she was trying to break her label away from HYBE, home to global sensation BTS, sending the K-pop giant's shares tumbling on Friday.

The internal dispute at HYBE, South Korea's biggest music firm, has wiped over 12% off its share price since it became public and put a damper on expectations for an upturn from new releases by NewJeans, as well as the return of some BTS members from mandatory military service.

HYBE shares fell more than 5% on Friday morning, while the benchmark KOSPI index rose more than 1% in early trading.

On Thursday, Min Hee-jin, CEO of the ADOR label majority owned by HYBE, told a live-streamed event watched by millions of K-pop fans that she was not plotting to break away from the company, denying HYBE claims that she was leading plans to go independent.

HYBE launched an internal probe earlier this week, and has accused Min of breach of trust.

"I'm sorry for causing worry to the fans, artists, and the staff over what happened during the process of upgrading the multi-label (system)," HYBE CEO Park Ji-won said in a statement.

Min and other top executives own a 20 percent stake in ADOR while HYBE owns an 80 percent stake.

The dispute is the latest to hit South Korea's lucrative K-pop industry.

Last year, the takeover of SM Entertainment by South Korean social media giant Kakao, triggered an internal battle over management, and Fifty Fifty, a girl group behind TikTok hit "Cupid," also saw their career fizzle out following a legal battle with its agency Attrakt in 2023.