[2023 National Audit] Lee Bok-hyun Agrees with Strict Punishment for Kakao, Says "Proceeding According to Procedure"

On the morning of the 17th, at the Financial Supervisory Service in Yeouido, Seoul, Lee Bok-hyun, the head of the Financial Supervisory Service, is seen taking an oath during the National Assembly's Political Affairs Committee audit of the Financial Supervisory Service.
[Image source=Yonhap News]

On the 27th, Lee Bok-hyun, Governor of the Financial Supervisory Service (FSS), expressed agreement with the call to strictly punish Kakao Corporation and Kim Beom-su, founder of Kakao and head of the Future Initiative Center, regarding allegations of market manipulation involving SM Entertainment (SM) during the National Assembly's Political Affairs Committee audit.

At the comprehensive audit of financial authorities by the National Assembly's Political Affairs Committee, Governor Lee responded to the question from Kang Min-kuk, a member of the People Power Party, who stated that Kakao's alleged market manipulation was a case of "causing harm to innocent victims through market disruption and using unfair means to achieve objectives, thus requiring strict punishment." When asked about the progress of the investigation into whether founder Kim Beom-su was involved in market manipulation, Lee said, "It is being conducted according to procedures."

The FSS's Capital Market Special Judicial Police (Special Judicial Police) referred Kakao executives suspected of manipulating SM's stock prices to the prosecution the day before. The corporation itself was also handed over to the prosecution under the principle of joint liability.

Assemblyman Kang pointed out, "Kakao has an enormous 127 subsidiaries domestically alone through aggressive mergers and acquisitions," adding, "They are recklessly expanding into profitable sectors ranging from taxi services, designated driver services, indoor golf, and beauty salons that infringe on local businesses, to finance and entertainment." He criticized, "Looking at Kakao's actions, it is hard to find sound growth strategies and ethical awareness that companies should pursue. As a result, weak ethics and internal control limitations have led to unfair practices such as executives 'cashing out' stock options and preferential treatment of affiliated taxis through manipulation of taxi dispatch algorithms."

Furthermore, Kang emphasized, "This stock manipulation suspicion seems to be the peak of their weak ethical awareness," and pointed out, "Kakao Bank is also being identified as a main culprit in intensifying competition in the banking sector and household debt problems by excessively expanding safe and profitable mortgage loans rather than loans for low- to mid-credit borrowers, which was its founding purpose."

Regarding the Kakao investigation, in response to Kang's question about market views that "if it were not for Lee Bok-hyun, a former prosecutor, it would have been difficult to proceed this far," Governor Lee said, "Since the second half of last year, the Financial Services Commission, prosecution, and FSS have been organizing various systems and ensuring that necessary systems are properly established," adding, "It is more about the government authorities systematically ensuring proper operation than individual will." On criticisms that the financial authorities' response to market manipulation and illegal short selling is still insufficient, he stated, "Authorities need to make greater efforts to restore trust in the capital market."