Kim Beom Su, the founder of Kakao and head of the Future Initiative Center, has been acquitted in the first trial on charges of manipulating SM Entertainment's stock price during its acquisition process.
The Seoul Southern District Court's 15th Criminal Division (presiding Judge Yang Hwan Seung) delivered the not-guilty verdict on the morning of October 21 for Kim Beom Su, who had been charged with violation of the Capital Market Act and related offenses. Kim was accused of directing stock price manipulation to prevent rival company HYBE from acquiring control of SM Entertainment.
After being acquitted, Kakao founder Kim Beom Su said upon leaving the courthouse, "I sincerely thank the court for thoroughly reviewing the case over such a long period and reaching this conclusion." He added, "I hope this ruling will serve as an opportunity to help Kakao move away, even slightly, from the shadow of allegations surrounding stock price manipulation."
According to investigations, in February 2023, Kim and Kakao, under the name Kakao Entertainment, purchased SM shares worth 130 billion KRW (approx. 90.8 million USD), while a private equity firm, One Asia Partners, acquired SM shares worth 110 billion KRW (approx. 76.9 million USD). During the prosecution's closing argument in August, they requested a 15-year prison sentence and a 500 million KRW (approx. 349,347.72 USD) fine for Kim, arguing that he "approved stock price manipulation through market accumulation while hiding Kakao's intention to acquire SM, making him the most responsible."
Kim's defense attorney argued that "even in the presence of public tender by another company, acquiring shares through market purchases is a perfectly legal decision," maintaining his innocence.
Alongside Kim, former Kakao Chief Investment Officer Bae Jae Hyun, as well as Kakao Corporation and Kakao Entertainment, which were indicted under corporate liability laws, were also acquitted of all charges. However, Ji Chang Bae, CEO of One Asia Partners, was sentenced to three years in prison with a four-year suspended sentence.
Meanwhile, the presiding judge also criticized the prosecution at the end of the trial, stating, "Conducting an aggressive investigation into unrelated matters and using that pressure to extract statements from suspects or related parties can, as seen in this case, lead to distorted and unjust outcomes. Regardless of which authority leads the investigation, such practices should be refrained from moving forward."
The court also stated, "If not for the testimony of former Kakao Entertainment Head of Investment Strategy Lee Jun Ho, the defendants might not even be standing here today, and some might not have been detained at all." The court added, "It appears that Lee gave false statements that differed from the facts under extreme pressure during the investigation of this and other related cases, which ultimately led to this outcome."
The court determined that the key evidence presented by prosecutors - the testimony of former Kakao Entertainment executive Lee Jun Ho - was false. “The statements by Mr. Lee, which the prosecution presented as their core evidence, do not align with objective facts and are deemed false,” the court said. “Mr. Lee had sufficient motive and reason to withdraw his earlier testimony and give statements that matched the investigators’ intent in order to avoid becoming a target of investigation himself.”
The court further explained, “Mr. Lee faced two arrest warrant requests, search and seizure operations, and intense investigative pressure involving his spouse, which caused him severe stress. It appears he sought to escape this situation and believed that giving statements favorable to the investigation in this case would lead to the end of the probe against him.” For these reasons, the court concluded that Mr. Lee’s testimony carried no evidentiary value.
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