Arrest Warrant Filed Against Kakao’s Chairman for Market Manipulation
The prosecutor’s office filed an arrest warrant against Kim Bum-soo, the founder of Kakao and chairman of the Management Reform Committee. Chairman Kim is accused of approving and ordering the manipulation of SM Entertainment’s stock price. The Financial Investigation Department 2 of the Southern District Prosecutor’s Office in Seoul announced on the morning of the 17th that it had filed an arrest warrant against Chairman Kim for violating the Capital Markets Act.
Allegations and Denials
The core accusation is that SM Entertainment manipulated the stock market. Kakao acquired SM Entertainment in February last year. During the process, Kakao was accused of artificially manipulating market prices, deliberately acquiring the company at a high price, and hindering competitors’ stock tender offers. Chairman Kim denied many of the accusations during the subpoena investigation on the 9th. He said that Kakao’s plan to purchase SM Entertainment shares in the market was indeed introduced to him and approved, but he did not receive a report on the specific purchase method and process.
Expanding Investigation and Possible Ramifications
The fact that Kakao purchased SM Entertainment stocks at high prices a total of 553 times in the market can be established to some extent. In the process, Kakao also omitted to report its large stock holdings to financial authorities. With this in mind, prosecutors have filed a case against Kakao Investment CEO Bae Jae-hyun and Kakao Corporation for market manipulation. If the court issues an arrest warrant for Chairman Kim, the scope of the investigation may be expanded to include other charges against Kakao. This is because Chairman Kim is the person who makes key decisions within the group. In addition to SM Entertainment’s alleged market manipulation, the Seoul Southern District Prosecutor’s Office is investigating allegations of corruption and breach of trust by executives of companies affiliated with Kakao blockchain platform Klaytn, suspected high-price acquisition of Kakao TV drama production company, and suspected solicitation of taxis owned by Kakao Mobility.
