Lee Bok-hyun "Confident in Uncovering the Truth Behind SM Price Manipulation Allegations... Will Impose the Highest Level of Sanctions"

Lee Bok-hyun, Governor of the Financial Supervisory Service (FSS), expressed confidence in uncovering the facts regarding the investigation into Kakao's alleged market manipulation during HYBE's acquisition of SM Entertainment. He stated, "We are confident in uncovering the truth" and added, "If any illegal activities are found, we will impose the highest possible level of sanctions." Regarding suspicions of improper transactions between SK Group and the private equity firm Alchemist, he also emphasized, "If any violations are discovered, the strictest sanctions will be applied."

Governor Lee made these remarks on the 17th after attending the launch event of the 'Small Business Together, Growth Solution' held at Shinhan Card headquarters in Jung-gu, Seoul, when asked by reporters about the investigation related to SM Entertainment.

[Image source=Yonhap News]

He explained, "I am cautious about discussing the scope of the investigation and inquiry," but added, "We are currently focusing all our capabilities on analyzing various materials and conducting a swift investigation." He further stated, "Since we are confident in uncovering the facts, we will share more details when the opportunity arises soon."

Regarding the allegations of improper transactions between SK Group and Alchemist, he said, "There have been quite a few recent cases where market participants, who should strive to secure financial trust, have exploited opportunities, thereby depriving consumers of benefits and damaging market trust, which harms the financial and economic sectors." He emphasized, "In the second half of the year, we plan to respond strictly not only to stock price manipulation and unfair trading in the capital market but also to those involved in market order-related work." He continued, "We hold a very strict standard regarding the misuse of funds and opportunities by asset management companies and others," and added, "If any violations are found in cases such as SM and Alchemist, we will apply the highest level of sanctions and take all measures to hold accountable those who illegally obtained profits. We are also closely cooperating with investigative agencies."

Meanwhile, HYBE filed a petition with the FSS on February 28, requesting an investigation after someone reportedly accumulated a large amount of SM Entertainment shares through IBK Investment & Securities' Pangyo branch during the public tender offer period on February 16. At that time, Kakao and Kakao Entertainment, HYBE's rivals in the management rights dispute, disclosed that they purchased 3.28% and 1.63% of SM Entertainment shares on February 28 and March 2-3, respectively, which intensified the controversy. February 28 was the last day of HYBE's public tender offer. On April 6, the FSS's Capital Market Special Judicial Police, under the direction of the prosecution, conducted a search and seizure at the Kakao and Kakao Entertainment offices in Pangyo, Gyeonggi Province, investigating whether there was artificial interference with stock prices in violation of the Capital Markets Act.

In the case of Alchemist, suspicions arose that it gained significant profits through improper methods during SK Hynix's acquisition of the semiconductor foundry company K-FAB, a contract manufacturing company. There were allegations that SK Group improperly supported Alchemist during the acquisition and resale of K-FAB and related companies. There are also suspicions that Mr. Eun, a close aide to SK Group Chairman Chey Tae-won, was involved.