Kim Beom-su, the founder of South Korean tech giant Kakao, walked free from the Seoul Southern District Court after being acquitted of serious market manipulation charges related to the hotly contested SM Entertainment takeover.
The verdict marks the end of over two and a half years of legal uncertainty for both Kim and Kakao, allowing the company’s leadership to resume normal business operations without the shadow of criminal penalties.
Prosecutors had sought a maximum punishment of 15 years imprisonment plus a 500 million Korean won fine for Kim, whom they accused of deliberately inflating SM stock prices above rival HYBE‘s tender offer to block their acquisition attempt in February 2023.
The indictment characterized Kim as the primary beneficiary of the alleged scheme, leveraging his position as Kakao’s de facto head and largest shareholder to orchestrate the manipulation.
The court, however, firmly rejected these allegations, ruling that influencing stock prices through legitimate market purchases does not constitute illegal manipulation under the Capital Market Act.
After examining the timing, ratios, and volume of Kakao’s stock purchases, judges found no evidence pointing to manipulative intent, instead determining that Kakao’s actions aimed at securing ownership rather than distorting market prices.
The business context proved vital to the court’s decision.
Kakao had sought to acquire 9.05% of SM shares amid competing efforts from HYBE, with the stated purpose of alleviating Kakao Entertainment’s significant financial difficulties, including 1.5518 trillion Korean won in debt and operating losses in 2022.
The court noted that expectations of rising SM stock prices existed independently of HYBE’s tender offer, supporting Kakao’s claim of lawful acquisition motives.
The case involved extensive legal proceedings with multiple hearings and thorough examination of corporate governance practices at Kakao.
In a pointed rebuke to the prosecution, the court criticized their reliance on coerced testimonies and unrelated cases to build their argument. This ruling has been widely viewed as a triumph for justice by the public, who followed the high-profile case with significant interest.
The acquisition of SM Entertainment, a major music publisher, would have positioned Kakao to benefit from royalty collections through various performance rights organizations worldwide.
Had the ruling gone differently, Kim would have faced not only criminal penalties but also significant limitations on his ability to develop sync deals for Kakao’s music division, which represent a crucial revenue stream in today’s entertainment landscape.
The acquittal allows Kim and Kakao executives to continue their business activities without criminal penalties, concluding a case that had threatened one of South Korea’s most prominent tech leaders with potentially devastating legal consequences.
