Photo Credit: Kim Beom-su for Acrofan / CC by 3.0
Kakao founder Kim Beom-su has been indicted by the Seoul Southern District Prosecutors’ Office on allegations of stock manipulation.
Kim Beom-su now faces a court trial after being indicted on allegations of stock manipulation related to his company Kakao’s acquisition of K-pop agency SM Entertainment. The Seoul Southern District Prosecutors’ Office alleges that he and other Kakao executives artificially injected 240 billion Korean won ($174.4 million) to inflate SM Entertainment’s stock prices between February 16 and 17, and February 27 and 28, in 2023. This, they say, was done in collusion with private equity fund OneAsia Partners, to block BTS agency Hybe from purchasing the stocks.
The executives are accused of interfering with the stock market on 553 occasions over the span of four days. Further, Kim allegedly refrained from reporting stock purchases to financial regulators; a company is obligated to make a regulatory report if it owns over five percent of another firm, and Kakao held an 8.16% stake in SM Entertainment during that period.
Kim Beom-su was arrested on July 23, while former Kakao CEO Hong Eun-taek and former Kakao Entertainment CEO Kim Sung-soo were indicted, but not arrested, on the same day. Initially, prosecutors had only tied Kim Beom-su to the manipulation said to have taken place on February 28 — but upon further investigation, authorities believe Kim was involved for the entirety.
At trial, prosecutors will need to prove that Kakao intentionally meddled with SM Entertainment’s shares with the purpose of obstructing Hybe’s attempts at acquisition. “We have secured sufficient material and testimonial evidence that Kim violated the relevant clause and plan to present them at the trial,” prosecutors told JoongAng.
The clause in question, Clause 3, Article 176 of the Capital Markets Act, states: “No one shall engage in making purchases or sales in connection with listed securities or exchange-traded derivatives or shall entrust or be entrusted with such act, with intent to fix or stabilize the market price of the listed securities or exchange-traded derivatives.”
While prosecutors sound confident in their burden of proof, Kakao’s attorneys maintain that Kim did not instruct or condone any “illegalities” involving the acquisition. The company released a statement that it would “diligently vindicate the facts during court trial,” and do its best to “minimize [Kim’s] management vacancy” with CEO Chung Shin-a serving as head of Kakao’s Corporate Alignment Council.
