Kakao Founder Kim Beom-su Faces 15 Years in SM Entertainment Takeover Appeal

Prosecutors are again seeking a 15-year prison sentence for Kim Beom-su, the founder of Kakao, over allegations that he manipulated the share price of SM Entertainment during Kakao's 2023 takeover bid. Kim was found not guilty in the first trial, and both sides are again arguing over whether the stock buying was market manipulation or a normal business move.

The request came on Sept. 23 at the Seoul High Court, where Criminal Division 4-1 held the final hearing in Kim's appeal on charges of violating the Capital Markets Act. Prosecutors asked the court to sentence Kim to 15 years in prison and fine him 510 million won. It is the same sentence they requested in the first trial.

Prosecutors also asked for 12 years in prison and a 510 million won fine for Bae Jae-hyun, the former head of investment at Kakao, who was indicted alongside Kim. They requested fines of 500 million won each for Kakao and Kakao Entertainment as corporate defendants.

Prosecutors argued that the lower court did not properly weigh the evidence supporting the charges. They asked the appellate court to overturn the not-guilty ruling, saying the first trial contained "errors of fact and misunderstandings of law."

The case centers on Kakao's bid to acquire SM Entertainment in 2023. Kim and other Kakao executives are accused of driving SM's share price above 120,000 won, the tender offer price set by rival HYBE, to block HYBE from completing its public tender offer.

At the time, HYBE had bought the stake held by SM founder and former chief producer Lee Soo-man and launched a tender offer at 120,000 won per share. Kakao and Kakao Entertainment then bought large volumes of SM shares on the open market. Prosecutors said those purchases were aimed at keeping the stock price above the tender offer price to derail HYBE's tender offer, and they indicted Kim and the other executives on that basis.

The first trial cleared Kim and the other main defendants.

The trial court ruled that the impact of Kakao's large open-market buying on SM's share price was not enough on its own to prove stock manipulation. Judges also said the timing and structure of the orders differed from typical patterns seen in manipulation cases.

The court added that even if Kakao acted with the business goal of blocking HYBE's tender offer, that goal is not the same as the intent to manipulate a stock price banned under the Capital Markets Act.

The core issue in the appeal is the same. Both sides are arguing over whether Kakao's large-scale share buying during the SM takeover fight was a normal investment in a corporate control contest, or an artificial push to lift the share price and derail HYBE's tender offer.

Prosecutors say communications between Kakao officials and the flow of funds show both the intent to manipulate the price and a shared plan among the defendants. Kim's side argues that a business decision to block a tender offer should be treated separately from an illegal intent to manipulate a stock price.

The appeals court is expected to set a verdict date sometime in October.