South Korean prosecutors are seeking an arrest warrant for Kim Beom-su, founder of internet company Kakao, in relation to allegations of stock manipulation during last year’s battle for control of K-pop powerhouse SM Entertainment.
Kim’s legal representative has denied any wrongdoing. After expressing “regret over the prosecution’s decision to file an arrest warrant”, they stated, “Kim has never ordered nor tolerated any forms of illegal actions tied to the purchase of shares in SM Entertainment”.
Kakao secured a controlling stake in SM Entertainment in March 2023 following a short takeover battle with rival K-pop company HYBE, which also wanted to acquire SM. Almost immediately HYBE accused Kakao of artificially driving up SM’s share price in order to obstruct its attempts to acquire stock in the company.
Korean financial regulators then launched an investigation in April 2023 which led to the indictment of Kakao’s Chief Investment Officer Bae Jae-hyun last November. That investigation has more recently focused on allegations against founder Kim, who was reportedly questioned by investigators for more than 20 hours earlier this month.
Kim is accused of colluding with private equity company OneAsia Partners in order to manipulate SM’s share price in early 2023. The alleged plan involved artificially boosting SM’s share price above 120,000 won through 553 purchases totalling 240 billion won, around £160 million. Such conduct would violate South Korea’s Financial Investment Services And Capital Markets Act.
Prosecutors filed legal papers earlier today requesting an arrest warrant for Kim. That request is due to be reviewed by a judge next Monday.
As well as its controlling stake in SM Entertainment, Kakao also has its own music business and operates South Korean streaming service Melon.