'SM Entertainment Stock Manipulation Allegations' Kakao Chief Investment Officer Arrested

"SM Entertainment Stock Hive Public Tender Offer Suspected of Price Manipulation"
Kakao Employee, Entertainment Executive's Arrest Warrant Dismissed

On the 19th, Bae Jae-hyun, Kakao's Chief Investment Officer, who is suspected of manipulating stock prices during the dispute over the management rights of SM Entertainment (hereinafter SM Entertainment), was arrested.

Judge Kim Ji-sook of the Seoul Southern District Court, who is in charge of the warrant, conducted a warrant hearing for Bae Jae-hyun, Kakao's Chief Investment Officer, who is accused of violating the Capital Markets Act, and issued an arrest warrant on the same day, citing "concerns of evidence destruction and flight risk." Bae, who appeared in court the previous afternoon, did not answer questions such as "Did you have the intention to obstruct HYBE's public tender offer for SM?" and "To what extent was Kakao founder Kim Beom-su informed?"

Bae Jae-hyun, Head of Kakao Investment, Attending the Arrest Warrant Hearing
Photo by Yonhap News

According to the Capital Markets Special Judicial Police of the Financial Supervisory Service, Bae is suspected of manipulating the stock price of SM Entertainment above HYBE's public tender offer price by investing 240 billion KRW in February to obstruct HYBE, a competitor in the SM Entertainment management rights acquisition battle. He is also suspected of failing to report a large stockholding of SM Entertainment shares to the financial authorities during this process. Under the Capital Markets Act, if the total shares held by oneself or related parties reach 5% or more of the issued shares, a report must be submitted to the Financial Services Commission or the stock exchange within five days.

Bae's side issued a statement after the special judicial police applied for an arrest warrant on the 13th, stating, "We only legally purchased stocks on the market and did not manipulate stock prices."

Kakao Pangyo Agit, Seongnam, Gyeonggi. Photo by Jinhyung Kang aymsdream@

Meanwhile, the arrest warrants for Kang Mo, Head of Kakao's Investment Strategy Office, and Lee Mo, Head of Kakao Entertainment's Investment Strategy Division, who were also subject to arrest warrant applications along with Bae, were dismissed. The court stated the reason for dismissal, saying, "Although the allegations are serious, the secured evidence appears to have substantially clarified the objective facts," and "It is difficult to see concerns of evidence destruction or flight risk."

Earlier this year, Kakao and HYBE engaged in a public tender offer competition over the acquisition of SM Entertainment. During the dispute, HYBE claimed that "abnormal stock purchases occurred," raising suspicions of Kakao's stock price manipulation. The Financial Supervisory Service launched an investigation in February and conducted raids on Kakao, SM Entertainment, and the office of Kakao founder Kim Beom-su. By March 28, Kakao and Kakao Entertainment had acquired a total of 39.87% of SM Entertainment's shares, becoming the largest shareholder.

This content was produced with the assistance of AI translation services.