An appeals court will rule in November on Kakao founder Kim Beom-su, who was acquitted at trial of manipulating the share price of SM Entertainment. Prosecutors again asked for a 15-year prison term at the appellate stage.
The 4-1 criminal division of the Seoul High Court, presided over by judges Kim In-kyung, Sung Ji-yong and Jeon Ji-won, set the ruling date for Kim, head of Kakao's Future Initiative Center, and his co-defendants for 10:20 a.m. on Nov. 20, according to legal sources on the 26th.
Kim and others are accused of manipulating SM Entertainment's stock price in February 2023 during Kakao's acquisition of the company, by pinning the share price above the tender offer price to obstruct a competing bid by HYBE. Prosecutors allege that Kim conspired with former Kakao investment chief Bae Jae-hyun and One Asia Partners, among others, to buy about 110 billion won ($79 million) of SM Entertainment shares over three days — Feb. 16, 17 and 27 of that year — carrying out more than 300 instances of price manipulation through tactics such as high-priced purchases and absorbing available supply.
The trial court acquitted Kim and Bae. It held that large on-market purchases by Kakao could not be treated as price manipulation merely because they affected the share price. Contrary to the prosecution's argument, the court also found it difficult to conclude that Kakao had to acquire management control of SM Entertainment at the time, or that a covert takeover was decided at Kakao's investment table, or that there were discussions on blocking the tender offer or a conspiracy to manipulate prices. Jee Chang-bae, head of One Asia Partners, was found guilty under the Act on Aggravated Punishment of Specific Economic Crimes and given a three-year prison sentence, suspended for four years.
At the final appellate hearing on the 23rd, prosecutors asked the court to impose a 15-year prison term and a 500 million won fine on Kim — the same sentence they sought at trial.
Prosecutors argued that the trial court erred in its findings of fact and application of the law when it concluded that Kakao's large on-market purchases could not be regarded as price manipulation. "To block the tender offer, they went as far as committing price manipulation through large-scale on-market buying, and there is abundant objective evidence supporting this," prosecutors said. "Despite the many clear pieces of evidence consistent with the alleged offenses, the lower court did not rule on them." They added that "the lower court's judgment contains errors of fact and law, and the acquittals of the defendants must be reversed."
At the first appellate hearing in June, prosecutors played a recording in which Kim was heard saying, "Bring it over peacefully." Kim shook his head as the recording was played. "On the founder's instructions, the defendants moved to block the tender offer and complete the acquisition while avoiding an outward fight with HYBE," prosecutors said.
Prosecutors also stressed the credibility of testimony from Lee Jun-ho, former head of investment strategy at Kakao Entertainment. At trial, prosecutors presented Lee's statements as key evidence against Kim. But the trial court concluded that Lee had given false statements under the pressure of repeated arrest warrant requests and investigations into separate matters, and took the unusual step of directly criticizing prosecutors, saying, "This kind of investigative method can distort the truth. Whoever the actor may be, it should now be avoided." Lee was accepted as a witness on appeal but did not appear. Prosecutors sought to call HYBE Chairman Bang Si-hyuk as a witness, but the court did not grant the request.
Kim's side, by contrast, argued that the acquittal should stand. It has repeatedly maintained that Kim voiced opposition during the SM Entertainment acquisition process and that the share purchases at the time were on-market buying to build a stake in SM Entertainment, not an attempt to manipulate the price.
In his final statement, Kim said, "I have held to the belief that corporate growth must follow the law and principles, and I did not direct any illegal act in connection with this case." He added, "Even after the indictment, no specific evidence of conspiracy has been presented showing when, where or to whom I ordered price manipulation." He also said, "I find it regrettable that Kakao has had to endure more than three years of trial," adding, "If given the chance, I will make sure Kakao does its utmost to fulfill its role for the public."
Prosecutors sought 12 years in prison for Bae, 10 years for Jee, and nine years for Kim Sung-soo, former chief executive of Kakao Entertainment. They also requested fines of 500 million won for each. For former Kakao CEO Hong Eun-taek, former Kakao investment strategy head Kang Ho-jung and former One Asia Partners vice president Kim Tae-young, prosecutors sought seven years in prison and a 500 million won fine each. For Kakao, Kakao Entertainment and One Asia Partners, which were also indicted under provisions holding corporations liable, prosecutors sought fines of 500 million won each.
