The appeal trial for Kakao founder Kim Beom-su, who was acquitted at first instance of taking part in stock price manipulation during the process of acquiring SM Entertainment, began on the 20th. At the first preparatory hearing, Kakao denied both the purpose of manipulating prices and the purpose of blocking HYBE's tender offer.
The Criminal Division 4-1 of the Seoul High Court (Presiding Judges Kim In-gyeom, Seong Ji-yong, Jeon Ji-won) held the first preparatory hearing that day for Kim, the founder, and others indicted on charges of violating the Financial Investment Services and Capital Markets Act, and organized the issues and the plan for the proceedings. The defendants did not appear, and attorneys for Kakao and Kakao Entertainment did.
Kim, the founder, was indicted on charges that, in Feb. 2023, during the process of acquiring SM Entertainment, he manipulated the market by causing the share price of SM Entertainment to be formed and maintained higher than the tender offer price of 120,000 won with the purpose of hindering HYBE's tender offer. Prosecutors say that on Feb. 16–17 and 27 of the same year, Kim conspired with former Kakao chief investment officer Bae Jae-hyun and One Asia Partners to trade more than 300 times by buying at high prices and depleting supply, involving about 110 billion won worth of SM Entertainment shares.
The court presented as the key issues on appeal the existence of a purpose to manipulate prices, whether the trading conduct constituted artificial price manipulation, and whether a conspiracy relationship can be recognized. The bench said, "Whether price manipulation is recognized is the most important point."
Kakao said, "Even before the stock purchases, the share price had already exceeded 120,000 won and showed no signs of falling," and argued, "There was no discussion at all of buying shares for the purpose of blocking the tender offer." It added, "There was no purpose to manipulate prices, nor any act of artificially adjusting prices."
Prosecutors countered by pointing to the fact that the expression "blocking the tender offer" was already used internally at Kakao. Prosecutors said that the defendants, management, and even working-level staff under former executive Bae used the same expression, and stated that it can only be interpreted as blocking the tender offer through price manipulation.
The court ordered both sides to submit their positions on whether to maintain the appeal and on organizing the issues. It set the deadline for evidence applications as Apr. 27, and for a summary preparatory brief of up to 30 pages as Apr. 30. The next preparatory hearing was set for May 8 at 2 p.m. About four formal hearings are expected to be held.
Earlier, on Oct. 21 last year, the first-instance court acquitted Kim, the founder, former executive Bae Jae-hyun, Kakao, and Kakao Entertainment. However, for Ji Chang-bae, head of One Asia Partners, it found some charges of violating the Act on the Aggravated Punishment of Specific Economic Crimes guilty and sentenced him to three years in prison, suspended for four years. The first-instance court found that the mere fact that there were large-scale on-exchange purchases during the tender offer period does not by itself allow a conclusion of price manipulation, and that there was insufficient proof to view Kakao's ordering pattern as orders intended to manipulate prices.