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Prosecutors appeal Kakao founder's stock manipulation acquittal

Published: 28 Oct. 2025, 19:53

Kim Beom-su, founder of Kakao and head of the Future Initiative Center, speaks to the press after being acquitted in the first trial for violating the Capital Markets Act at the Seoul Southern District Court in Yangcheon District, western Seoul, on Oct. 21. [NEWS1]

Prosecutors on Tuesday appealed a court ruling that acquitted Kakao founder Kim Beom-su of charges related to stock manipulation in the company’s controversial acquisition of SM Entertainment.

The Seoul Southern District Prosecutors’ Office announced Tuesday afternoon that it had filed an appeal against the not-guilty verdict handed down to Kim by a lower court, citing “misinterpretation of facts and misapplication of the law” in the ruling.

Under Korea’s Criminal Procedure Act, appeals must be submitted within seven days of the verdict.

Prosecutors argued that the case involves “illegal stock price manipulation conducted by Kakao to interfere with HYBE’s lawful tender offer in its bid for SM Entertainment,” adding that the actions “misled general investors into believing SM stock prices would rise, resulting in significant losses.”

The prosecution also pointed to evidence, including messages and call recordings among Kakao executives discussing strategies to block HYBE’s bid, as well as recordings of phone conversations suggesting coordinated testimony after the investigation began. They claimed this evidence was not adequately considered by the trial court.

In particular, the prosecution took issue with the court’s remarks suggesting that a key witness — former Kakao Entertainment executive Lee Jun-ho — may have lied under pressure from an unrelated investigation. Prosecutors said they “take seriously” the court’s suggestion and will work to implement “institutional safeguards” to prevent such concerns.

Kim Beom-su, head of Kakao’s Future Initiative Center, is released on bail from the Seoul Southern Detention Center in Guro District, western Seoul, on Oct. 31, 2024, after being detained over SM Entertainment stock manipulation allegations. [NEWS1]

The Seoul Southern District Court found Kim not guilty on Oct. 21. The court ruled that Kakao’s large-scale on-market purchases of SM shares during HYBE’s tender offer period did not constitute market manipulation solely because of their impact on the share price.

The court also noted that there was market speculation at the time that SM shares could rise further even after the tender offer expired, and accepted the defense’s argument that Kakao’s purchases were aimed at securing shares, not manipulating the price.

The ruling also rejected the credibility of testimony from Lee, a key witness for the prosecution, noting that he had reversed his original statements under pressure from a separate investigation.

Following the initial ruling, prosecutors said they would review the verdict before deciding whether to appeal, expressing “difficulty accepting parts of the decision,” especially those that criticized prosecutorial conduct.

The case will now be reviewed by the Seoul High Court.

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
BY HYEON YE-SEUL [[email protected]]