Kakao Chairman Kim Beom-soo Indicted and Detained

Kim Beom-soo, the chairman of Kakao's Management Innovation Committee, has been indicted and detained on charges of manipulating SM Entertainment's stock prices, according to the Financial Investigation Division 2 of the Seoul Southern District Prosecutors' Office. The indictment also includes former Kakao CEO Hong Eun-taek and former Kakao Entertainment CEO Kim Sung-soo, who were indicted without detention.

Prosecutors allege that Kim, along with former Kakao Chief Investment Officer Bae Jae-hyun and One Asia Partners, purchased SM Entertainment stocks under One Asia Partners' name for about 110 billion won (approximately $74 million) over three days from February 16, 17, and 27, totaling 363 transactions. These purchases were allegedly made to keep the stock price above the public tender offer price of 120,000 won, thereby hindering HYBE, a competitor in the acquisition of SM Entertainment.

On February 28, Kim allegedly conspired with former Kakao CEO Hong and former Kakao Entertainment CEO Kim to purchase SM Entertainment stocks under the names of Kakao and Kakao Entertainment for about 130 billion won over 190 transactions. Due to these large-scale purchases, Kakao, Kakao Entertainment, and One Asia Partners' combined stake in SM Entertainment exceeded 5%, which required a large-scale holding report. However, One Asia Partners' stake was not disclosed.

"Kim orchestrated a systematic manipulation of SM Entertainment's stock prices by mobilizing affiliated companies," prosecutors stated. Prosecutors requested an arrest warrant for Kim on charges of violating the Capital Markets Act on July 17. The court issued the arrest warrant on July 23, citing concerns that Kim might destroy evidence and flee.

Initially, prosecutors charged Kim with only one count of stock price manipulation on February 28, but additional charges were added during the detention investigation.

Coincidentally, on the same day as the indictment announcement, Kakao announced its second-quarter earnings. Kakao's consolidated revenue for the second quarter was provisionally estimated at 2.049 trillion won, a 4% increase from the same period last year, marking the highest second-quarter revenue for the Kakao Group. Operating profit increased by 18.5% to 134 billion won during the same period, while net profit surged by 59.1% to 87.1 billion won.