All twelve defendants, including Kakao, its founder Kim Beom-su, and several high-ranking executives, have been acquitted of stock manipulation charges in a landmark ruling delivered by the Seoul Southern District Court in October 2025. The verdict marks the conclusion of a protracted legal battle spanning over two and a half years, during which prosecutors had sought substantial penalties, including a 15-year prison sentence for Kim and fines of 500 million won for Kakao.
Kakao and executives walk free after two-year legal saga over alleged market manipulation during SM Entertainment takeover.
The case centered on allegations that Kakao artificially maintained SM Entertainment’s stock price above HYBE’s tender offer of 120,000 Korean won during a heated corporate takeover battle in February 2023. Prosecutors claimed this constituted a deliberate strategy to block HYBE’s acquisition attempt, citing internal communications where Kim allegedly instructed to “peacefully take over” SM Entertainment as evidence of manipulative intent.
In its ruling, the court determined that insufficient evidence existed to prove violations of the Capital Markets Act, noting that Kakao’s trading patterns—including purchase ratios, intervals, and order volumes—did not align with typical market manipulation strategies. The court’s decision emphasized a lack of intent to manipulate the market by Kakao and its leadership. The court also questioned the reliability of prosecution evidence, pointing out that key witnesses denied hearing the directives attributed to Kim about obstructing HYBE’s efforts.
The Seoul Southern District Prosecutors’ Office has expressed its intention to review the ruling thoroughly, defending its investigative methods despite the court’s criticism of witness pressure tactics. The acquittal represents a major victory for the defense team, which consistently maintained the founder’s innocence throughout the proceedings. The case has drawn particular attention from music industry professionals who typically rely on diverse income streams rather than stock market investments for financial stability. For music creators involved with both entertainment companies, understanding royalty collection through Performance Rights Organizations remains essential regardless of corporate ownership changes. A decision regarding a potential appeal remains pending, with prosecutors maintaining their belief that market manipulation did occur during the acquisition process.
Market analysts suggest the acquittal will likely restore investor confidence in Kakao, potentially accelerating the company’s initiatives in AI technology and stablecoin development. The removal of this legal cloud may reinvigorate Kakao’s expansion strategies and intensify competition with HYBE in the entertainment and technology sectors.
Kakao’s stock price is expected to respond positively as the company sheds this significant regulatory risk.
