Kakao’s Legal Team: “All Evidence Has Already Been Impeached”
The prosecution has appealed the first-instance ruling that acquitted Kim Beomsoo, founder of Kakao and head of the Future Initiative Center, who was indicted on charges of manipulating the stock price of SM Entertainment.
On October 28, the Seoul Southern District Prosecutors’ Office announced that it had filed an appeal against Kim, who was acquitted in the first trial on charges of violating the Capital Markets Act, citing reasons such as factual misinterpretation and errors in legal principles.
Previously, the 15th Criminal Division of the Seoul Southern District Court (Chief Judge Yang Hwansung) acquitted Kim and other Kakao officials who had been indicted for violating the Capital Markets Act. The court reasoned that it was difficult to conclude there had been collusion to block the tender offer or conspire to manipulate the stock price during investment table discussions, and that the objective trading patterns were not consistent with price manipulation.
In response, the prosecution stated, "The first-instance court accepted the defendants' claims that it was difficult to see any collusion to block the tender offer or manipulate the stock price, and that the shares were accumulated to secure volume in anticipation of a price increase, and rendered a not-guilty verdict. However, this contradicts substantial evidence or fails to consider such evidence," explaining the grounds for the appeal.
As evidence, the prosecution disclosed: ▲ objective evidence such as messages and recorded calls among related parties discussing price manipulation, and ▲ recordings of calls in which the parties discussed strategies to respond to the Financial Supervisory Service’s subsequent investigation and the prosecution’s inquiry, including instructions to memorize responses for the prosecutor’s questions.
Additionally, on February 28, 2023, the last day of the tender offer, while institutions, individuals, and foreign investors sold SM shares, Kakao purchased 1.05 million SM shares for 130 billion won, accounting for 96.7% of the net purchase volume by other corporations, thereby concentrating on buying up large quantities of shares. The prosecution added that orders intended to fix and stabilize the price by the defendants, reflecting an intent to manipulate the price, played a decisive role in the share price increase on that day.
The prosecution also argued that the first-instance court misinterpreted Article 176, Paragraph 3 of the Capital Markets Act. The court’s premise that, in addition to being a series of trades as defined by the Act, it must also be proven that the trades were abnormal orders that affected the price, directly contradicts the legal principles and the intent of Supreme Court precedents, and thus requires review by a higher court.
However, regarding the court’s unusual criticism that the only key evidence presented by the prosecution-the testimony of Lee Junho, former head of Investment Strategy at Kakao Entertainment-appeared to be a false statement made to evade pressure from a separate investigation, the prosecution stated, "Regardless of the validity of the ruling, we take this matter seriously and will establish institutional safeguards going forward."
The prosecution further rebutted, "The investigation was not conducted unfairly for the purpose of proving the price manipulation charges, and the witness, while testifying in court, decided to tell the truth rather than testify in line with the prosecution’s wishes, and thus testified truthfully."
In response, law firm Gwangjang, representing Kakao, issued a statement on October 29, saying, "These are arguments that were thoroughly reviewed during the first trial and were rejected by the court."
The firm also argued that the evidence disclosed by the prosecution "was already examined in the first trial and was impeached by more specific and credible evidence," and that "some portions have been sensationally edited, resulting in significant distortion of their actual meaning."
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