SEOUL (CelebrityAccess) – The Seoul Southern District Prosecutors Office has requested an arrest warrant for Kim Beom-su, the billionaire founder of Kakao Corp., whose entertainment division now controls SM Entertainment (SM).
According to South Korean news reports, prosecutors claim that Beom-su violated South Korea’s Financial Investment Services and Capital Markets Act by allegedly plotting to manipulate SM’s stock price to push HYBE out of the bidding for the K-pop agency.
According to the Korea Herald, they allege that Beom-su and other Kakao executives inflated SM’s stock price by injecting KRW 240 billion (USD 174 million) into the company through 553 stock price purchases in mid to late February of 2023. Additionally, prosecutors accuse Kakao of failing to report its stake in SM during the bidding war. Private equity fund management firm OneAsia Partners is also accused of colluding with Beom-su in the stock manipulation, reports Korea JoongAng Daily.
The request for the tech giant founder’s arrest warrant comes shortly after he endured what JoongAng Daily described as “20 hours of intense interrogation” by authorities from July 9 into the early hours of July 10, during which Beom-su reportedly denied most allegations.
In a statement, Kim’s attorneys at Sejong Law Firm denied any wrongdoing by the Kakao founder.
“Kim Beom-su, chairman of Kakao’s Corporate Alignment Council, did not instruct nor condone any illegal activities regarding the purchase of SM Entertainment shares last year,” the attorney said in a press statement. “The transaction was a legitimate market purchase aimed at securing shares for business collaboration purchases. Nevertheless, we regret that this matter has progressed to a stage where the prosecution has filed for an arrest warrant. We will diligently explain and clarify these points during the warrant review process.” the statement read, as quoted by JoongAng Daily.
The Seoul Southern District Court will review the prosecution’s arrest warrant request on Monday (July 22).
SM is considered the second-largest K-pop company behind HYBE. Its roster includes popular acts like Vespa, EXO, Girls Generation, Red Velvet, and Super Junior.
During last year’s bidding war, the Herald reported that SM’s stock price soared above KRW 120,000 ($87) per share. This was the price at which HYBE had purchased 14.8% of SM from its founder, Lee Soo-man, and the fixed price at which it was buying shares from other shareholders.
The inflated stock price led to HYBE’s withdrawal from bidding, effectively allowing Kakao Corp. to control SM with a 39.9% stake.
However, HYBE filed a legal complaint against Kakao, alleging stock price manipulation, which prompted an investigation, including raids on Kakao’s headquarters and SM’s offices.
In October last year, Kakao’s Chief Investment Officer, Bae Jae-hyun, was arrested, and Seoul prosecutors indicted him for violating the Capital Markets Act. Bae and the chief executive of OneAsia Partners, identified only by the surname Ji, are currently standing trial on related charges.
Despite the accusations, Korean trade regulators approved the Kakao-SM deal earlier this year, with conditions to ensure Kakao doesn’t abuse its strong position in the music market. Among these conditions is a requirement for Kakao-owned Melon, South Korea’s largest music streaming service, to distribute music from labels and distributors that compete with SM.
