Prosecutors Expand Kakao Investigation to Kim Beom-su Over 'SM Entertainment Stock Manipulation Suspicions'

The prosecution investigating allegations of stock price manipulation involving Kakao's SM Entertainment (hereinafter SM Entertainment) is expanding the scope of the investigation to include Kim Beom-su, head of the Future Initiative Center and founder of Kakao.

Kim Beom-su, former chairman of Kakao, is appearing at the Financial Supervisory Service on the 23rd of last month to be investigated regarding allegations of stock price manipulation related to the acquisition of SM Entertainment. Photo by Kang Jin-hyung aymsdream@

A representative from the Seoul Southern District Prosecutors' Office told reporters on the afternoon of the 15th, "Six people, including Director Kim, are scheduled to be transferred from the Financial Supervisory Service's Special Judicial Police (Special Judicial Police) today," adding, "After the transfer, we will review the investigation details and conduct any necessary further investigations." The prosecution also stated that they will proceed with the investigation of Director Kim following standard procedures, including summons for questioning. The Financial Supervisory Service's Special Judicial Police summoned Director Kim as a suspect for questioning on the 23rd of last month.

Among the six individuals scheduled for transfer to the prosecution is a lawyer who provided legal advice during the time of the price manipulation. The Financial Supervisory Service's Special Judicial Police revealed that Kakao sought advice from law firms on methods of committing and concealing the crime during the price manipulation process. However, regarding whether the lawyer was actively involved in the crime, a prosecution official stated, "Since the judgments of the police, prosecution, and courts differ, we will carefully review and reach a conclusion after the transfer."

The investigation into Kang Ho-jung, head of Kakao's Investment Strategy Office, and Lee Jun-ho, head of Kakao Entertainment's Investment Strategy Division, who avoided detention during the investigation, will continue. Previously, the Special Judicial Police requested arrest warrants for three individuals, including Bae Jae-hyun, Chief Investment Officer, but the court only detained Chief Bae, dismissing the warrants for Kang and Lee, stating, "Although the charges are serious, the objective facts appear to be substantially clarified based on the secured evidence." Accordingly, only Chief Bae was detained and transferred on the 26th of last month, while the other two were transferred without detention. A prosecution official said regarding Kang and Lee, "Since there is a need to investigate them together with the cases scheduled for transfer, it was decided to indict them separately."

Earlier, on the 13th, the Seoul Southern District Prosecutors' Office Financial Investigation Division 2 (Chief Prosecutor Park Geon-young) indicted Chief Bae on charges of violating the Capital Markets Act and indicted Kakao Corporation without detention under the joint liability provisions of the Capital Markets Act. Chief Bae and others are accused of manipulating the stock price by mobilizing approximately 240 billion KRW in total in February to purchase SM shares at high prices in 409 transactions, aiming to set and fix the SM stock price higher than the public tender offer price of 120,000 KRW by HYBE, thereby obstructing HYBE's public tender offer to acquire SM's management rights. They are also charged with failing to report large stock holdings of SM Entertainment shares to the financial authorities during this process.

Meanwhile, regarding Kim Jeong-hwan, a stock broadcasting YouTuber who was indicted for violating the Capital Markets Act but acquitted in the first trial, the prosecution announced plans to appeal. Known as the so-called "Super Ant," Kim was indicted in June on charges of gaining approximately 5.8 billion KRW in unfair profits by recommending five stocks on his YouTube stock broadcast and engaging in prior trading. The court acquitted him, stating that since the defendant disclosed on the broadcast that he held and could sell the stocks or had sold them, it was difficult to view this as a failure to disclose conflicts of interest.