Police called in Yang on Wednesday to look into allegations that he treated potential foreign investors at a posh restaurant in Seoul and arranged sex services for them in 2014. Yang was summoned for the investigation but not a suspect.
Yang has flatly denied the allegations.
In a related probe, police investigated K-pop star Psy earlier this week as he was cited as one of the singers who allegedly were at the scene of the sex services.
The probe into Yang came as big-name artists from YG Entertainment have been embroiled in a series of scandals, including drug allegations.
Yang resigned from the top post at the company earlier this month, giving up his control of South Korea's third-biggest listed K-pop label.
B.I, the songwriting leader of K-pop boy band iKON, one of the promising boy bands under YG, left the band earlier this month on allegations that he bought prohibited drugs three years ago.
He was the second YG artist engulfed in a drug-related issue this year. In March, Seungri was dispelled from boy band BIGBANG and the talent agency after a nightclub associated with him came under investigation over drug use and sexual abuse. His case was referred to the prosecution Tuesday on embezzlement and pimping charges. (Yonhap)