I hope this will be an opportunity to step, even a little, out of the shadow of stock price rigging and market manipulation that has hung over Kakao.
Kim Beom-su, Kakao founder and head of the Future Initiative Center, said on the 21st, right after being acquitted at the first trial in connection with the "SM Entertainment market manipulation" allegations, "I am sincerely grateful to the court for carefully reviewing the materials over a long period and reaching this conclusion." Kakao, which wrote a venture startup success story by replacing paid text messages with the mobile messenger "KakaoTalk," welcomed the news of Kim's acquittal in unison. Kim is expected to focus on devising the Kakao Group's future strategy. However, it is difficult to say the legal risk has been fully resolved yet, as the market manipulation case is likely to go to the Supreme Court.
On this day, the Criminal Agreement Division 15 of the Seoul Southern District Court (presiding judge Yang Hwan-seung) acquitted Kim, who was put on trial on charges of violating the Capital Markets Act. Earlier, on Aug. 29, prosecutors sought 15 years in prison and a fine of 500 million won for Kim. This was the maximum statutory sentence suggested by the Sentencing Commission for market manipulation charges.
Kakao said right after the ruling, "Until now, Kakao has been misunderstood as an immoral corporations that engaged in market manipulation," adding, "We understand that the first-trial acquittal confirms that such a misunderstanding was inappropriate." It continued, "The Kakao Group has faced various difficulties due to the investigation and trial that continued for 2 years and 8 months," and added, "It is particularly painful that we were unable to respond swiftly to rapid market changes, but we will work harder to make up for this and fulfill our given social mission."
Kim was detained in August last year and was released on bail in October of the same year. Due to health issues, Kim stepped down in March this year from the position of co-chair of the CA Council, the group's top decision-making body. However, Kim is maintaining the role as head of the Future Initiative Center, which charts the group's vision and future strategy.
Kakao, tied down by legal risks, showed some sluggishness in responding to future new businesses, including artificial intelligence (AI). In the Ministry of Science and ICT's "independent AI foundation model" project, it lost out to Naver, LG AI Research Institute, SK Telecom, NC AI, and Upstage. A recent major KakaoTalk update met with user backlash. An industry official said, "It is true that large-scale mergers and acquisitions and business restructuring are hard to carry out nimbly unless the founder steps in directly."
Rather than returning to the company immediately, Kim, who was diagnosed with early-stage bladder cancer early this year, is expected to focus on considering Kakao's future and taking care of health. Kakao and the Kakao CA Council, an independent group body, are currently led by Chung Shin-a.
Kakao's finance institutional sector, cited as a core business at the group level, also caught a breath. According to the financial sector, the Internet-Only Bank Act stipulates that "a major shareholder of an internet bank must not have received a punishment of a fine or more in the past five years for violations of the △ Punishment of Tax Offenses Act △ Act on the Aggravated Punishment of Specific Economic Crimes △ Fair Trade Act." In particular, if it is determined that eligibility is not met due to joint penal provisions that hold both employees and the company accountable, an order may be issued to dispose of bank shares held in excess of the holding limit (10%).
Kim Jun-ik, a professor in the business administration department at Konkuk University, said, "What matters in this ruling is that the founder's 'symbolic capital' has been restored," adding, "In platform corporations, symbolic capital is a key factor that connects the trust of investors, consumers, and partner companies." He added, "This incident could trigger a 'governance learning effect' within Kakao, strengthening decision-making transparency and risk management systems."