Kim Beom-su, the Kakao founder and chairperson of the Management Reform Committee, was acquitted on the 21st in the first trial on charges of manipulating SM Entertainment's stock price. The court ruled that Kakao's purchases of SM Entertainment shares during HYBE's tender offer period for SM Entertainment shares did not constitute market manipulation under the Capital Markets Act.
On this day, the Seoul Southern District Court Criminal Division 15 (Presiding Judge Yang Hwan-seung) held a sentencing hearing on Chairperson Kim's alleged violation of the Capital Markets Act and said, "We acquit." It was a first-trial acquittal one year and two months after Chairperson Kim was indicted in Aug. last year. Earlier, prosecutors had sought a 15-year prison sentence for Chairperson Kim.
The court said, "As a defense or competitive measure against a tender offer, on-exchange purchases are generally permitted, and depending on their timing, scale, and method, they are bound to affect prices," adding, "We cannot accept the argument that large-scale on-exchange purchases constitute manipulation merely because they affected prices." It continued, "Even after examining all forms of the purchases Kakao made on the exchange at the time—high-price buy orders, volume depletion orders, and closing-price orders—there is insufficient basis to deem them manipulative orders."
The court also said, "In the testimony of a person surnamed Lee, an executive at Kakao Entertainment, which is virtually the only evidence in this case, there are many inconsistencies," adding, "Rather, Lee appears to have had sufficient motive and reason to give false testimony to avoid becoming the subject of investigation and trial." It went on, "Lee's testimony, the key evidence consistent with the prosecutor's indictment, is hard to believe."
After being acquitted, Chairperson Kim left the court and said, "I am truly grateful to the court for carefully reviewing this over a long period and reaching this conclusion," adding, "I hope this serves as an opportunity, however small, to step out from the shadow of stock price manipulation and market manipulation that has hung over Kakao."
Earlier, the Financial Supervisory Service's special judicial police (special investigation team) sent Chairperson Kim to prosecutors with a recommendation to indict on Nov. 15, 2023. The issue was that in Feb. 2022 Kakao, together with Kakao Entertainment and private equity firm One Asia Partners, spent 240 billion won to buy SM Entertainment shares at high prices 553 times.
Prosecutors, judging that as Kakao Group's top decision-maker Chairperson Kim had been briefed on and approved the stock manipulation plan in advance, indicted him under detention on Aug. 8 last year. Chairperson Kim was released on bail in Oct. the same year and has since stood trial without detention.