With Kakao founder Kim Beom-su and others acquitted in the first trial on allegations of price rigging in SM Entertainment (SME) shares, Young Poong and MBK Partners, which had gone on the offensive claiming that Korea Zinc was also involved in the price rigging, were left in an awkward position. Young Poong and MBK had raised suspicions that Korea Zinc was involved in SME price rigging, citing the flow of funds from Korea Zinc → One Asia Partners → Kakao and testimony from a prosecution witness who said, "I heard a conversation discussing collusion."
The Criminal Agreement Division 15 of the Seoul Southern District Court on the 21st acquitted Kim, the founder, along with former Kakao Chief Investment Officer Bae Jae-hyun, former Kakao Entertainment CEO Kim Sung-soo, and former Kakao CEO Hong Eun-taek, who were indicted on charges of violating the Financial Investment Services and Capital Markets Act. The court also acquitted the Kakao corporation, the Kakao Entertainment corporation, and the One Asia Partners corporation.
In delivering the acquittals, the court found it highly likely that the testimony of the prosecution's sole witness, Lee Jun-ho, former head of investment strategy at Kakao Entertainment, was "false." Lee testified to prosecutors that he heard, via speakerphone, a conversation in which former executive Bae Jae-hyun and One Asia Partners CEO Ji Chang-bae conspired to engage in price rigging.
Based on Lee's testimony, prosecutors argued that Kakao and One Asia Partners colluded in advance to artificially drive up SME's stock price to thwart HYBE's tender offer for SME equity. However, the court said, "The witness's testimony is contrary to common sense, self-contradictory, and not consistent with objective evidence."
As Lee's testimony lost credibility, Young Poong's allegations that Korea Zinc was involved also became less convincing. Young Poong had argued that if One Asia Partners and Kakao colluded in price rigging in advance, Korea Zinc, which supplied funds to One Asia Partners, must also have been aware of it in advance.
Just last month, Young Poong distributed press releases such as "Korea Zinc is the key funder behind SM Entertainment stock manipulation," "Evidence that Korea Zinc was the financing source for SM Entertainment stock manipulation," and "Korea Zinc invested despite knowing the SM price-rigging structure." Korea Zinc has countered that it only contributed funds to the Havana No. 1 fund for financial investment purposes and that it had nothing to do with SME price rigging.
One Asia Partners used the Havana No. 1 fund to purchase SME shares, and the largest contributor to that fund was Korea Zinc. Korea Zinc paid 101.6 billion won into Havana No. 1, providing more than 90% of the investment. Korea Zinc Chairman Choi Yoon-beom is a middle school classmate of CEO Ji Chang-bae. Ji was acquitted of price rigging in this case, but he was sentenced to three years in prison, suspended for four years, after being found guilty of embezzlement for using fund contribution money for personal purposes.
After the first-trial ruling, Young Poong said, "One Asia Partners is a newly formed private equity fund, and we took issue with Korea Zinc investing based on personal ties," adding, "The SME (investment) was judged to be a case that shows One Asia Partners' investment structure is risky. CEO Ji Chang-bae was found guilty, which should be seen as revealing that Korea Zinc made a bad investment."
The Korea Zinc management control dispute, which began in September last year with Young Poong and MBK's tender offer for Korea Zinc equity, has entered a prolonged phase with 24 lawsuits exchanged. At the regular shareholders' meeting in Mar. next year, the terms of five directors, including Chairman Choi Yoon-beom, will expire, and the board's composition is expected to change.