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Home Kakao

 Court Trial Heats Up: Kakao Founder Faces Prison over Controversial SM Deal

Dae-Hyun by Dae-Hyun
PUBLISHED: August 30, 2025 UPDATED: September 1, 2025
in Kakao
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 Court Trial Heats Up: Kakao Founder Faces Prison over Controversial SM Deal

Image credits: Yonhap

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South Korean prosecutors have requested a 15-year prison sentence and a 500 million won ($360,000) fine for Kim Beom-su, also known as Brian Kim, the founder of tech giant Kakao Corp. The demand was made on Friday during the final hearing of a criminal trial over alleged stock manipulation linked to Kakao’s 2023 acquisition of K-pop agency SM Entertainment. Kim was previously arrested over the allegations but released on bail last year.

 

Prosecutors accused Kim of directing Kakao executives to artificially inflate SM Entertainment’s share price in February 2023, aiming to gain a controlling stake in the agency during a competitive bidding battle against rival company Hybe. They argued that, as the ultimate beneficiary of the alleged manipulation, Kim deserved a severe penalty, noting that he “continuously opposed” pursuing SM’s takeover through lawful competition.

 

Prosecutors argued that Kim, as the head of Kakao Group, arranged the takeover of SM Entertainment while hiding his true intentions. They said he authorized stock purchases designed to inflate SM’s share price, effectively blocking rival company Hybe’s tender offer. “Kim approved the manipulation of SM Entertainment’s stock price through on-market purchases to conceal Kakao’s acquisition plans and obstruct Hybe, and therefore bears the greatest responsibility,” prosecutors said.

 

According to authorities, Kim stood to gain the most from the alleged scheme, making him more culpable than the six co-defendants involved in the case. Alongside Kim, prosecutors sought prison sentences ranging from seven to 12 years for the executives implicated in the manipulation, while Kakao and Kakao Entertainment were each fined 500 million won.

 

The charges center on allegations that Kim artificially raised SM Entertainment’s share price above Hybe’s tender offer of 120,000 won per share in February 2023. Prosecutors claim he funneled approximately 240 billion won to purchase shares at inflated prices, tipping the acquisition contest in Kakao’s favor.

 

Kim has consistently denied the allegations, maintaining that he never ordered or condoned any illegal activity. In court testimony, he emphasized that he had no plans to profit unlawfully while managing Kakao. 

The trial, conducted by the 15th Criminal Division of the Seoul Southern District Court under Judge Yang Hwan-seung, concluded with prosecutors formally requesting a 15-year prison term and 500 million won fine for Kim. They highlighted that, despite knowing he lacked legitimate competitive qualifications as the de facto head of Kakao, he continued to direct the SM acquisition and approved actions that manipulated the stock market.

 

Prosecutors further noted that under Kakao and Kakao Entertainment, the group purchased SM shares worth 1.3 trillion won across 190 transactions, while the private equity firm One Asia Partners executed 363 transactions totaling 1.1 trillion won. These coordinated purchases were alleged to have maintained SM’s share price above Hybe’s tender, blocking the competitor’s bid.

 

Kim, recognized as a visionary in South Korea’s digital industry for founding Kakao and growing it into a group of affiliates valued at 86 trillion won ($62 billion), now chairs Kakao’s Management Innovation Committee. The court’s ruling in this high-profile case is expected to draw close attention from both the business and tech communities, given the potential implications for corporate governance and market conduct in South Korea.

Image credits: Yonhap

 

Tags: governmentKakaoLawsuitSM Entertainment

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